Asked by Genna Greco on Jun 03, 2024
Verified
Clouthier Corporation has two divisions: Home Division and Commercial Division.The following report is for the most recent operating period: The company's common fixed expenses total $29,700.
Required:
a.What is the Home Division's break-even in sales dollars?
b.What is the Commercial Division's break-even in sales dollars?
c.What is the company's overall break-even in sales dollars?
Break-even
The point at which total revenues equal total costs, resulting in no net loss or gain.
Sales Dollars
The total monetary value of sales transactions made within a specific period, reflecting the revenue generated from selling goods or services.
Common Fixed Expenses
Regular, unchanged expenses that a business incurs, regardless of the level of production or sales volume.
- Evaluate the break-even points for specific divisions as well as the complete corporation.
Verified Answer
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $91,640 ÷ $158,000 = 0.580
Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio
= $69,000 ÷ 0.580 = $118,966
b.Commercial Division break-even:
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $87,570 ÷ $139,000 = 0.630
Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio
= $68,000 ÷ 0.630 = $107,937
c.The company's overall break-even sales:
CM ratio = Contribution margin ÷ Sales
= $179,210 ÷ $297,000 = 0.603 (rounded)
Total fixed expenses = Total traceable fixed expenses + Common fixed expenses
= $137,000 + $29,700 = $166,700
Dollar sales to break even = Total fixed expenses ÷ CM ratio
= $166,700 ÷ 0.603 = $276,268 (using the unrounded CM ratio)
Learning Objectives
- Evaluate the break-even points for specific divisions as well as the complete corporation.
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