Jemmott Corporation has two divisions: Western Division and Eastern Division. The following report is 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) $94,243
B) $271,743
C) $264,685
D) $358,929

Question

Jemmott Corporation has two divisions: Western Division and Eastern Division. The following report is 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) $94,243 
B) $271,743 
C) $264,685 
D) $358,929

Quizplus · Accepted Answer

CM ratio = Contribution margin ÷ Sales
= $294,120 ÷ $406,000 = 0.724 (rounded)
Total fixed expenses = Total traceable fixed expenses + Common fixed expenses
= $191,000 + $69,020 = $260,020
Dollar sales to break even = Total fixed expenses ÷ CM ratio
= $260,020 ÷ 0.724 = $358,929 (using the unrounded CM ratio)

Jemmott Corporation Has Two Divisions: Western Division and Eastern Division