Question

Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement shown below:TotalCompany North South Sales $ 600,000 $ 400,000 $ 200,000 Variable expenses 360,000 280,000 80,000 Contribution margin 240,000 120,000 120,000 Traceable fixed expenses 132,000 66,000 66,000 Segment margin 108,000 $ 54,000 $ 54,000 Common fixed expenses 56,000 Net operating income $ 52,000 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. (Round your break-even dollar sales to the nearest whole number.)

Answer 1

Answer:

1. BEP Company 470,000

2. BEP North 220,000

3. BEP South 110,000

Explanation:

The formula for BEP( Break even point)

Break even point in dollars = Fixed cost / Contribution margin ratio , where

Contribution margin ratio = Contribution margin / Sales revenue

To get started, Contribution margin ratio needed to be calculated.

North CMR = 120,000/400,000

= 0.3

South CMR = 120,000/ 200,000

= 0.6

Company = 240,000/600,000

= 0.4

Therefore, BEP(Dollars)

BEP(Dollars) = Fixed cost/ Contribution margin ratio

North = 66,000 / 0.3

= 220,000

South = 66,000 / 0.6

= 110,000

For the company, we will need to add common and segmented fixed cost;

Common fixed cost. 56,000

Segmented fixed cost 132,000

Total fixed cost 188,000

= 188,000 / 0.4

= 470,000