Question

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 dollar sales.

2. Compute the break-even point in dollar sales for the North region.

3. Compute the break-even point in dollar sales for the South region.

(For all requirements, round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar.)

rev: 02_08_2018_QC_CS-117419

Answer 1

	Total Company	North	South
Contribution margin	300000	150000	150000
Divide by Sales	937500	750000	187500
Contribution margin ratio	32%	20%	80%
Break even point = Fixed expenses/Contribution margin ratio
1
Companywide break-even point	637500	=(142000+62000)/32%
2
Break-even point for the North region	355000	=71000/20%
3
Break-even point for the South region	88750	=71000/80%