Question

Warburton corporation has two divisions: alpha and beta. data from the most recent month appear below: alpha beta sales $222,000 $229,000 variable expenses $51,060 $66,410 traceable fixed expenses $125,000 $100,000 the company's common fixed expenses total $85,690. the break-even in sales dollars for alpha division is closest to:

Answer 1

Calculation of break-even in sales dollars for alpha division:

Break-even in sales dollars is calculated with the help of following formula:

Break-even in sales dollars = Traceable fixed Cost / Contribution Margin Ratio

We know the following information:

Sales for Alpha Division =$222,000

Variable expenses for Alpha Division =$51,060

Traceable fixed expenses for Alpha Division = $125,000

Step-1: Calculation of Contribution Margin Ratio:

Contribution Margin Ratio = (Sales – Variable Expenses) / Sales

Contribution Margin Ratio = (222000-51060)/222000 = 0.77

Step-2: Calculation of break-even in sales dollars:

Break-even in sales dollars = Traceable fixed Cost / Contribution Margin Ratio

Break-even in sales dollars = 125000 /0.77 = $162,337.66

Hence the Break-even in sales dollars for Alpha Division is closest to $162,338