Question

Wyrich 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 Gold Division’s break-even sales is closest to:

Answer 1

Answer:

The Gold Division’s break-even sales is closest to $102,174

Explanation:

Break even point is the level of sales at which business has no profit no loss position. At this level of sales business covers all the variable and fixed costs as well.

                                             Gold Division

Sales                                         $131,000

Contribution margin                 $60,260

Contribution Margin Ratio        46%

Traceable fixed expenses       $47,000

Break-even Sales                     $102,174

Common fixed cost will not be added in calculation of divisional break-even.

Working

Contribution margin ratio = Contribution margin / Sales = 60260 / 131,000 = 46%

Break-even Sales = Fixed cost of division / Contribution margin of division = $47,000 / 46% = $102,174