Exercise 4-10 (Algo) Companywide and Segment Break-Even Analysis [LO4-5]

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	$ 1,170,000	$ 720,000	$ 450,000
Variable expenses	877,500	576,000	301,500
Contribution margin	292,500	144,000	148,500
Traceable fixed expenses	166,000	67,000	99,000
Segment margin	126,500	$ 77,000	$ 49,500
Common fixed expenses	60,000
Net operating income	$ 66,500

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. 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?