Question

Nuzum Corporation has two divisions: Division M and Division N. Data from the most recent month appear below: Total Company Division M Division N Sales $557,000 $254,000 $303,000 Variable expenses 144,910 81,280 63,630 Contribution margin 412,090 172,720 239,370 Traceable fixed expenses 273,000 128,000 145,000 Segment margin 139,090 44,720 94,370 Common fixed expenses 94,690 43,180 51,510 Net operating income $ 44,400 $ 1,540 $ 42,860 Management has allocated common fixed expenses to the Divisions based on their sales. The break-even in sales dollars for Division N is closest to:

Answer 1

Answer:

$ 183,544.30 = $ 183,544

Explanation:

Nuzum Corporation

                                       Total             Division M         Division N          

Sales                              $557,000          $254,000      $303,000

Variable expenses          144,910             81,280             63,630

Contribution margin        412,090            172,720          239,370

Traceable fixed expenses 273,000        128,000          145,000

Segment margin                139,090          44,720            94,370

Common fixed expenses 94,690           43,180               51,510

Net operating income    $ 44,400          $ 1,540           $ 42,860

First we find the Segment CM ratio by the following formula:

Segment Contribution Margin Ratio= Segment Sales- Segment Variable Expenses/ Sales

Segment Contribution Margin Ratio= 303,000 -63630/303000

Segment Contribution Margin Ratio= 239370/303000=0.79

Then we find the break even sales in dollars.

Break Even Sales in Dollars= Traceable Fixed Expense/ Segment Contribution Margin Ratio

Break Even Sales in Dollars =145,000/0.79=  $ 183,544.303