Pevy 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 company's overall break-even sales is closest to:
A)$286, 163
B)$174, 205
C)$236, 996
D)$49, 167

Question

Pevy 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 company's overall break-even sales is closest to:
A)$286, 163 
B)$174, 205 
C)$236, 996 
D)$49, 167

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $332, 000 - $92, 400 = $332, 000
CM ratio = Contribution margin ÷ Sales
= $239, 600 ÷ $332, 000 = 0.722 (rounded)
Total fixed expenses = Total traceable fixed expenses + Common fixed expenses
= $170, 000 + $36, 520 = $206, 520
Dollar sales to break even = Total fixed expenses ÷ CM ratio
= $206, 520 ÷ 0.722 = $286, 163 (using the unrounded CM ratio)

Pevy Corporation Has Two Divisions: Southern Division and Northern Division