Question

Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period:

	Total Company		Southern Division			Northern Division
Sales	$	267,000	$	154,400		$	112,600
Variable expenses	$	90,908	$	57,128		$	33,780
Traceable fixed expenses	$	126,800	$	55,600		$	71,200
Common fixed expense	$	53,400	$	30,880		$	22,520

The common fixed expenses have been allocated to the divisions on the basis of sales.

The Northern Division’s break-even sales is closest to:

Answer 1

Answer:

Northern Division’s contribution margin ratio          = ( Sales (-) variable Expenses ) / Sales          = ( $ 112,600 (-) $ 33,780 ) / $ 112,600          =    70%

Northern Division’s break-even sales          = Traceable fixed expenses / Northern Division’s contribution margin ratio          =   $ 71,200 / 70%          =    $ 101,714

Northern Division’s break-even sales    =    $ 101,714