Question

Bertie Corporation has two divisions: Retail Division and Wholesale Division. The following data are for the most recent operating period: Total Company Retail Division Wholesale Division Sales $ 486,400 $ 300,000 $ 186,400 Variable expenses $ 146,560 $ 72,000 $ 74,560 Traceable fixed expenses $ 240,700 $ 173,600 $ 67,100 The common fixed expenses of the company are $80,600. The Wholesale Division’s break-even sales is closest to:

Answer 1

Answer:

The division break-even sales are $167,750.

Explanation:

The break even point is the amount of sales needed in order to pay all the fixed and variable costs. If the Wholesale Division's sales are 186,400 and its variable costs are 74,560, that means for each dollar of sales, it has a contribution margin of $0.4 (74,560/186,400 = $0.4), In other words, it has $0.4 for each dollar of sales for paying fixed costs. So, it needs 167,750 dollar of sales to paying all the fixed costs (67,100/0.4 = $167,750). The common fixed expenses of all the company doesn't matter.