Question

1. Should a company allocate its common fixed expenses to business segments when computing the break-even...

1. Should a company allocate its common fixed expenses to business segments when computing the break-even point for those segments? Why?

2. When the units produced are greater than the units sold, which method would show the higher net operating income, variable costing or absorption costing? Explain.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. A company should not allocate its common fixed expenses to business segments when computing the break-even point for those segments as they do not pertain particularly to the segment and allocation of the same would increase the number of units required to break even. Besides the common fixed expenses will be continued to get incurred even if the business segment is discontinued.

2. If the units produced are greater than the units sold, then absorption costing would show the higher net operating income. This would be the case as the fixed factory overhead per unit for the unsold goods would not be allocated in that period and this would result in a lower cost of goods sold.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Exercise 6-10 Companywide and Segment Break-Even Analysis [LO6-5] Crossfire Company segments its business into two regions—East...
Exercise 6-10 Companywide and Segment Break-Even Analysis [LO6-5] Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 1,170,000 $ 720,000 $ 450,000 Variable expenses 877,500 576,000 301,500 Contribution margin 292,500 144,000 148,500 Traceable fixed expenses 166,000 67,000 99,000 Segment margin 126,500 $ 77,000 $ 49,500 Common fixed expenses 60,000 Net operating income $ 66,500 Required: 1. Compute the companywide break-even point...
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format...
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 1,050,000 $ 700,000 $ 350,000 Variable expenses 787,500 560,000 227,500 Contribution margin 262,500 140,000 122,500 Traceable fixed expenses 152,000 61,000 91,000 Segment margin 110,500 $ 79,000 $ 31,500 Common fixed expenses 70,000 Net operating income $ 40,500 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point...
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format...
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 975,000 $ 650,000 $ 325,000 Variable expenses 682,500 487,500 195,000 Contribution margin 292,500 162,500 130,000 Traceable fixed expenses 156,000 68,000 88,000 Segment margin 136,500 $ 94,500 $ 42,000 Common fixed expenses 60,000 Net operating income $ 76,500 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point...
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format...
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 915,000 $ 610,000 $ 305,000 Variable expenses 732,000 518,500 213,500 Contribution margin 183,000 91,500 91,500 Traceable fixed expenses 111,000 51,000 60,000 Segment margin 72,000 $ 40,500 $ 31,500 Common fixed expenses 60,000 Net operating income $ 12,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point...
Exercise 6-5 Companywide and Segment Break-Even Analysis [LO6-5] Piedmont Company segments its business into two regions—North...
Exercise 6-5 Companywide and Segment Break-Even Analysis [LO6-5] Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 937,500 $ 750,000 $ 187,500 Variable expenses 637,500 600,000 37,500 Contribution margin 300,000 150,000 150,000 Traceable fixed expenses 142,000 71,000 71,000 Segment margin 158,000 $ 79,000 $ 79,000 Common fixed expenses 62,000 Net operating income $ 96,000 Required: 1. Compute the companywide break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 937,500 $ 750,000 $ 187,500 Variable expenses 637,500 600,000 37,500 Contribution margin 300,000 150,000 150,000 Traceable fixed expenses 146,000 73,000 73,000 Segment margin 154,000 $ 77,000 $ 77,000 Common fixed expenses 64,000 Net operating income $ 90,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 800,000 $ 600,000 $ 200,000 Variable expenses 560,000 480,000 80,000 Contribution margin 240,000 120,000 120,000 Traceable fixed expenses 126,000 63,000 63,000 Segment margin 114,000 $ 57,000 $ 57,000 Common fixed expenses 54,000 Net operating income $ 60,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 800,000 $ 600,000 $ 200,000 Variable expenses 560,000 480,000 80,000 Contribution margin 240,000 120,000 120,000 Traceable fixed expenses 144,000 72,000 72,000 Segment margin 96,000 $ 48,000 $ 48,000 Common fixed expenses 63,000 Net operating income $ 33,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement shown below: Total Company North South Sales $ 900,000 $ 675,000 $ 225,000 Variable expenses 630,000 540,000 90,000 Contribution margin 270,000 135,000 135,000 Traceable fixed expenses 132,000 66,000 66,000 Segment margin 138,000 $ 69,000 $ 69,000 Common fixed expenses 57,000 Net operating income $ 81,000 Required: 1. Compute the companywide break-even point in dollar sales. Dollar sales for company to break-even...
Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s...
Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the company’s divisional managers could use to calculate their break-even points and make decisions. She took the prior month’s companywide income statement and prepared the absorption format segmented income statement shown below: Total Company Commercial Residential Sales $ 1,020,000 $ 340,000 $ 680,000 Cost of goods sold 669,800 180,200 489,600 Gross margin 350,200 159,800...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT