Question

Pherrell Corporation has two divisions: Bulb Division and Seed Division. The following report is for the most recent operating period:

Bulb Division Seed Division

Sales $ 238,500 $ 159,000

Variable expenses $ 62,010 $ 33,390

Traceable fixed expenses $ 144,480 $ 65,190

Common fixed expense $ 30,180 $ 20,120

The common fixed expenses have been allocated to the divisions on the basis of sales.

Required: a. What is the Bulb Division’s break-even in sales dollars? b. What is the Seed Division’s break-even in sales dollars? c. What is the company’s overall break-even in sales dollars?

Answer 1

	Calculation break-even point
		Bulb Division	Seed Division	Total
	Sales (A)	$238,500	$159,000	$397,500
	Less: Variable expenses (B)	$62,010	$33,390	$95,400
	Contribution margin (C)	$176,490	$125,610	$302,100
	Less Fixed costs: (D)
	Traceable fixed expenses	$144,480	$65,190	$209,670
	Common fixed costs	$30,180	$20,120	$50,300
	Net Income (E=C-D)	$1,830	$40,300	$42,130
	Formula:
	Break-even point = Fixed cost/P.v ratio
	P.v ratio = Contribution/sales*100
	P.v ratio (F)	74%	79%	76%
	Fixed costs = Traceable+Common (G)	$174,660	$85,310	$259,970
Ans	Break-even point (H=G/F) sales dollars	$236,027.03	$107,987.34	$342,065.79