Exercise 7-10 Companywide and Segment Break-Even Analysis [LO7-5]

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	$	975,000		$	650,000		$	325,000
Variable expenses		731,250			520,000			211,250
Contribution margin		243,750			130,000			113,750
Traceable fixed expenses		139,000			55,000			84,000
Segment margin		104,750		$	75,000		$	29,750
Common fixed expenses		73,000
Net operating income	$	31,750

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?

Exercise 7-10 Companywide and Segment Break-Even Analysis (LO7-5) Crossfire Company segments its business into two regions-East and West. The company prepared a contribution format segmented income statement as shown below: Sales Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income Total Company $ 975,000 731,250 243,750 139,000 104,750 73,000 $ 31,750 East $ 650,000 520,000 130,000 55,000 $ 75,000 West $ 325,000 211,250 113,750 84,000 $ 29,750 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 Crossfire's 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? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 Req 5 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 your intermediate calculations to 2 decimal places.) Show less Break-Even Point Dollar sales for the whole company Dollar sales for the East region Dollar sales for the West region Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 Req 5 Req 1 to 3 Do you thin the Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region? OYes ONO Reg 4 Reg 5