Exercise 4-10 (Static) 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	$	900,000		$	600,000		$	300,000
Variable expenses		675,000			480,000			195,000
Contribution margin		225,000			120,000			105,000
Traceable fixed expenses		141,000			50,000			91,000
Segment margin		84,000		$	70,000		$	14,000
Common fixed expenses		59,000
Net operating income	$	25,000

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?

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.

(Round intermediate calculations to 2 decimal places)

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	Break-Even point
Dollar sales
Dollar sales for the East region
Dollar sales for the West region