Question

Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below:

Total Company Division L Division Q

Sales $ 577,000 $ 158,000 $ 419,000

Variable expenses 347,300 104,280 243,020

Contribution margin 229,700 53,720 175,980

Traceable fixed expenses 124,110 38,710 85,400

Segment margin 105,590 $ 15,010 $ 90,580

Common fixed expenses 70,310

Net operating income $ 35,280


The break-even in sales dollars for Division Q is closest to: (Round your intermediate calculations to 2 decimal places.)


Multiple Choice

$318,530

$203,333

$268,466

$459,400

Answer 1

$203,333

Explanation:

Computation for the break-even in sales dollars for Division Q

First step is to compute the Segment Contribution Margin ratio

Using this formula

Segment Contribution Margin ratio = Segment contribution margin ÷ Segment sales

Let plug in the formula

Segment Contribution Margin ratio= $ 175,980÷ $ 419,000

Segment Contribution Margin ratio= 0.42

Last step is to find the break-even in sales dollars for Division Q using this formula

Break-even in sales dollars = Segment traceable fixed expenses ÷ Segment Contribution Margin ratio

Let plug in the formula

Break-even in sales dollars= $85,400÷ 0.42

Break-even in sales dollars=$203,333

Therefore the break-even in sales dollars for Division Q is $203,333