Question

Harper Corporation has two divisions: Blue Division and Gold Division. The following report is for the...

Harper Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

Total Company Blue Division Gold Division
Sales $ 522,000 $ 391,000 $ 131,000
Variable expenses 160,670 89,930 70,740
Contribution margin 361,330 301,070 60,260
Traceable fixed expenses 286,000 239,000 47,000
Segment margin 75,330 $ 62,070 $ 13,260
Common fixed expenses 73,080
Net operating income $ 2,250

The company’s overall break-even sales is closest to:

A. 412,564

B.506,409

C.518,750

D.106,186

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Answer #1

Overall contribution margin = $361,330

Overall sales = $522,000

Overall contribution margin ratio = Overall contribution margin/ Overall sales

= 361,330/522,000

= 69.2203065%

Total fixed costs of the company = Traceable fixed expenses + Common fixed expenses

= 286,000+73,080

= $359,080

Overall break even sales = Total fixed costs of the company / Overall contribution margin ratio

= 359,080/69.2203065%

= $518,750

The company’s overall break-even sales is closest to $518,750.

Correct option is C.

Kindly give a positive rating if you are satisfied with this solution and please ask if you have any query.

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