Question

Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given below:OfficeTotal Company Chicago MinneapolisSales $ 637,500 100.0% $ 127,500 100% $ 510,000 100%Variable expenses 344,250 54.0% 38,250 30% 306,000 60%Contribution margin 293,250 46.0% 89,250 70% 204,000 40%Traceable fixed expenses 142,800 22.4% 66,300 52% 76,500 15%Office segment margin 150,450 23.6% $22,950 18% $127,500 25%Common fixed expenses not traceable to offices 102,000 16.0% Net operating income $48,450 7.6% Required:1-a. Compute the companywide break-even point in dollar sales. (Round "CM ratio" to 2 decimal places and final answer to the nearest whole dollar amount.)Break-even point in dollar sales 1-b. Compute the break-even point for the Chicago office and for the Minneapolis office. (Round "CM ratio" to 2 decimal places and final answer to the nearest whole dollar amount.)Break-even PointChicago office Minneapolis office

Answer 1

Company's BEP: $ 532,173,91

Chicago BEP: $ 94.714,00

Minneapolis BEP: $ 191,250.00

Step-by-step explanation:

Company's BEP:

Weight per division:

127,500 / 637,500 = 0.2

510,000 / 637,500 = 0.8

Mix contribution:

Chicago: 0.2 x 70% = 0.14

Minneapolis: 0.8 x 40% = 0.32

Total 0.46

BEP:

total fixed cost: 142,800 tracable + 102,000 non traceable = 244,800

contribution: 0.46

`(244,800)/(0.46) = Break\: Even\: Point_(dollars)`

BEP: 532173,9130434783

Chicago Break even point:

fixed cost 142,800

contribution margin 70%

`(Fixed\:Cost)/(Contribution \:Margin \:Ratio) = Break\: Even\: Point_(dollars)`

`(66,300)/(0.70) = Break\: Even\: Point_(dollars)`

Chicago BEP: $ 94.714,28

Minneapolis BEP:

Fixed cost: 76,500

contribution margin: 40%

`(76,500)/(0.40) = Break\: Even\: Point_(dollars)`

Minneapolis BEP: 191,250