Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: The common fixed expenses have been allocated to the divisions on the basis of sales.
The Southern Division's break-even sales is closest to:
A) $192,661
B) $265,119
C) $386,408
D) $130,508

Question

Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period:  The common fixed expenses have been allocated to the divisions on the basis of sales.
The Southern Division's break-even sales is closest to:
A) $192,661 
B) $265,119 
C) $386,408 
D) $130,508

Quizplus · Accepted Answer

Segment contribution margin = Segment sales - Segment variable expenses
= $193,000 - $79,130 = $113,870
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $113,870 ÷ $193,000 = 0.590
Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio
= $77,000 ÷ 0.590 = $130,508

Neelon Corporation Has Two Divisions: Southern Division and Northern Division