Neelon 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) $272,067
B) $328,299
C) $114,341
D) $386,408

Question

Neelon 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) $272,067 
B) $328,299 
C) $114,341 
D) $386,408

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $418,000 - $130,880 = $418,000
CM ratio = Contribution margin ÷ Sales
= $287,120 ÷ $418,000 = 0.687 (rounded)
Total fixed expenses = Total traceable fixed expenses + Common fixed expenses
= $186,000 + $79,420 = $265,420
Dollar sales to break even = Total fixed expenses ÷ CM ratio
= $265,420 ÷ 0.687 = $386,408 (using the unrounded CM ratio)

Neelon Corporation Has Two Divisions: Southern Division and Northern Division