Question

Combe Corporation has two divisions: Alpha and Beta. Data from the most recent month appear below:

Alpha Beta
Sales $173,000 $318,200
Variable expenses $96,880 $130,000
Traceable fixed expenses $90,090 $91,000

The company’s common fixed expenses total $90,500. The break-even in sales dollars for Alpha Division is closest to:

a. $383,447
b. $177,021
c. $206,426
d. $144,800

Answer 1

$204,750

Step-by-step explanation:

The computation is shown below:

Break even point = (Fixed expenses) ÷ (Profit volume Ratio)

where,

Contribution margin = Sales - Variable expense

= $173,000 - $96,880

= $76,120

And, Profit volume ratio = (Contribution margin) ÷ (sales) × 100

So, the Profit volume ratio = ($76,120) ÷ ($173,000) × 100 = 44%

And, the fixed expenses is $90,090

So, the break-even in sales dollars would be

= ($90,090) ÷ (44%)

= $204,750

This is the answer and the same is provided in the given options