Question

Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given:

							Office
	Total Company						Chicago						Minneapolis
Sales	$	498,000		100	%		$	174,000		100	%		$	324,000		100	%
Variable expenses		249,000		50	%			52,200		30	%			194,400		60	%
Contribution margin		249,000		50	%			121,800		70	%			129,600		40	%
Traceable fixed expenses		139,440		28	%			90,480		52	%			51,840		16	%
Office segment margin		109,560		22	%		$	31,320		18	%		$	77,760		24	%
Common fixed expenses not traceable to offices		69,720		14	%
Net operating income	$	39,840		8	%

rev: 06_09_2020_QC_CS-215744, 09_15_2020_QC_CS-220558

Exercise 6-16 Part 1 (Algo) Working with a Segmented Income Statement; Break-Even Analysis [LO6-4, LO6-5]

Required:

1-a. Compute the companywide break-even point in dollar sales.

1-b. Compute the break-even point for the Chicago office and for the Minneapolis office.

1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?

Answer 1