Question

Problem 2:

Hallow Company has two divisions: North Division and South Division. The following report is for the most recent operating period:

	North Division		South Division
Sales	$	235,000	$	192,000
Variable expenses	$	103,400	$	105,600
Traceable fixed expenses	$	80,000	$	58,000

Required:

a. Prepare a segmented income statement in the contribution format for the company.

b. What is the North Division's break-even in sales dollars?

c. What is the South Division's break-even in sales dollars?

d. What is the company's overall break-even in sales dollars?

Answer 1

A. income statement

	North Division	South Division
Sales	$235,000	$192,000
Less: Variable expenses	($103,400)	($105,600)
Less: Traceable fixed expenses	($ 80,000)	($ 58,000)
NET INCOME	$51,600	$28,400

North Division's break-even

Sales	$235,000
Less:Variable expenses	($103,400)
Contribution Margin	$131,600
Less: Traceable fixed expenses	($80,000)
NET INCOME	$51,600

South Division's break-even in sales dollars

Sales	$192,000
Less:Variable expenses	($105,600)
Contribution Margin	$86,400
Less: Traceable fixed expenses	($58,000)
NET INCOME	$28,400

company's overall break-even in sales dollars

Sales	$427,000
Less:Variable expenses	($209,000)
Contribution Margin	$218,000
Less: Traceable fixed expenses	($138,000)
NET INCOME	$80,000