Exercise 6-10 (Static) 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	$ 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 you computed in requirements 2 and 3. What is Crossfires net operating income (loss) in your new segmented income statement?
5. Do you think Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?