Hogans Corporation has two divisions: Delta and Echo. Data from the most recent month appear below: The company's common fixed expenses total $64,090. The break-even in sales dollars for Echo Division is closest to:
A)$250,143
B)$387,059
C)$173,469
D)$304,265

Question

Hogans Corporation has two divisions: Delta and Echo. Data from the most recent month appear below:  The company's common fixed expenses total $64,090. The break-even in sales dollars for Echo Division is closest to:
A)$250,143 
B)$387,059 
C)$173,469 
D)$304,265

Quizplus · Accepted Answer

To calculate the break-even in sales dollars for Echo Division, we need to first calculate the contribution margin for each division:

Delta Division: 
Sales: $440,000 
Variable Expenses: $286,000 
Contribution Margin: $154,000

Echo Division: 
Sales: x 
Variable Expenses: 0.35x 
Contribution Margin: 0.65x

The total contribution margin for the company is calculated as: 
$154,000 + 0.65x = total contribution margin

To calculate the break-even point, we set the total contribution margin equal to the fixed expenses: 
$154,000 + 0.65x = $64,090

Solving for x, we get: 
0.65x = $64,090 - $154,000 
0.65x = -$89,910 
x = -$89,910 / 0.65 
x = $138,314

Therefore, the break-even in sales dollars for Echo Division is closest to $173,469 (which is 0.35x). Choice C is the answer.

Hogans Corporation Has Two Divisions: Delta and Echo