Gardella Corporation has two divisions: Domestic Division and Foreign 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 Domestic Division's break-even sales is closest to:
A) $309,474
B) $157,895
C) $224,211
D) $470,663

Question

Gardella Corporation has two divisions: Domestic Division and Foreign 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 Domestic Division's break-even sales is closest to:
A) $309,474 
B) $157,895 
C) $224,211 
D) $470,663

Quizplus · Accepted Answer

Segment contribution margin = Segment sales - Segment variable expenses
= $210,000 - $90,300 = $119,700
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $119,700 ÷ $210,000 = 0.570
Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio
= $90,000 ÷ 0.570 = $157,895

Gardella Corporation Has Two Divisions: Domestic Division and Foreign Division