Question
Crossfire Company segments its business into two regionsEast and West. The company prepared a contribution format segmented income statement as shown below: Total Company East
Crossfire Company segments its business into two regionsEast and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 930,000 $ 620,000 $ 310,000 Variable expenses 744,000 514,600 229,400 Contribution margin 186,000 105,400 80,600 Traceable fixed expenses 116,000 51,000 65,000 Segment margin 70,000 $ 54,400 $ 15,600 Common fixed expenses 62,000 Net operating income $ 8,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfires net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
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