Zable Corporation has two divisions: Town Division and Country Division. The following report is for the most recent operating period: Town DivisionCountry DivisionSales$235,000$192,000Variable expenses$103,400$105,600Traceable fixed expenses$80,000$58,000The company's common fixed expenses total $68,320.Required:a. What is the Town Division's break-even in sales dollars?b. What is the Country Division's break-even in sales dollars?c. What is the company's overall break-even in sales dollars?

What will be an ideal response?



 Total CompanyTown DivisionCountry Division
Sales$427,000 $235,000 $192,000
Variable expenses 209,000  103,400  105,600
Contribution margin 218,000  131,600  86,400
Traceable fixed expenses 138,000  80,000  58,000
Segment margin 80,000 $51,600 $28,400
Common fixed expenses 68,320      
Net operating income$11,680      
a.

Town Division break-even:

Segment CM ratio = Segment contribution margin ÷ Segment sales

= $131,600 ÷ $235,000 = 0.560

Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio

= $80,000 ÷ 0.560 = $142,857

b.
Country Division break-even:

Segment CM ratio = Segment contribution margin ÷ Segment sales
= $86,400 ÷ $192,000 = 0.450

Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio
= $58,000 ÷ 0.450 = $128,889

c.

The company's overall break-even sales:

CM ratio = Contribution margin ÷ Sales

= $218,000 ÷ $427,000 = 0.511 (rounded)

Total fixed expenses = Total traceable fixed expenses + Common fixed expenses

= $138,000 + $68,320 = $206,320

Dollar sales to break even = Total fixed expenses ÷ CM ratio

= $206,320 ÷ 0.511 = $404,122 (using the unrounded CM ratio)

Business

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