Exercise 6-10 Companywide and Segment Break-Even Analysis [LO6-5]

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. 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?