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 Foreign Division's break-even sales is closest to:
A) $305,000
B) $249,412
C) $470,663
D) $177,941

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 Foreign Division's break-even sales is closest to:
A) $305,000 
B) $249,412 
C) $470,663 
D) $177,941

Quizplus · Accepted Answer

Segment contribution margin = Segment sales - Segment variable expenses
= $270,000 - $86,400 = $183,600
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $183,600 ÷ $270,000 = 0.680
Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio
= $121,000 ÷ 0.680 = $177,941

Gardella Corporation Has Two Divisions: Domestic Division and Foreign Division