Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below: The break-even in sales dollars for Division Q is closest to:
A) $352,635
B) $234,615
C) $403,635
D) $512,742

Question

Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below:  The break-even in sales dollars for Division Q is closest to:
A) $352,635 
B) $234,615 
C) $403,635 
D) $512,742

Quizplus · Accepted Answer

To calculate the break-even in sales dollars for Division Q, we need to use the formula: 
Break-even = Fixed costs / Contribution margin ratio

For Division Q, the fixed costs are $410,800 ($248,800 + $162,000), and the contribution margin ratio is 30% ($879,000 / $2,930,000).

Thus, Break-even = $410,800 / 0.3 = $1,369,333

However, we are only looking for the break-even in sales dollars for Division Q, so we need to subtract Division L's contribution margin from the total contribution margin:

Division Q's break-even in sales dollars = ($1,369,333 - ($2,930,000 x 0.25)) / 0.3 = $234,615

Therefore, the closest answer choice is B) $234,615.

Delisa Corporation Has Two Divisions: Division L and Division Q