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I need help with Break-even point. I'm not calculating the right answer. I only need help with the 3 with the question marks. Please explain
I need help with Break-even point. I'm not calculating the right answer. I only need help with the 3 with the question marks. Please explain so I will know how to do it.
Toxaway Company is a merchandiser that segments its business into two divisionsCommercial and Residential. The company's accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: Sales Cost of goods sold Gross margin Sellin g and admini strative expens es Net operati ng income Total Company $ 900,000 Commercial $ 300,000 Residential $ 600,000 579,000 153,000 426,000 321,000 147,000 174,000 280,000 124,000 156,000 $ 41,000 $ 23,000 $ 18,000 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $72,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $48,000 of fixed expenses that would be avoided if the Residential segment is dropped, and $70,000 of fixed expenses that would be avoided if the Commercial segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? Yes No 2-a. Based on the intern's segmented income statement, can you determine how she allocated the company's common fixed expenses to the Commercial and Residential segments? Common fixed expenses Commercial $24000 Residential $48000 2-b. Do you agree with her decision to allocate the common fixed expenses to the Commercial and Residential segments? Yes No 3. Redo the intern's segmented income statement using the contribution format. Income Statement Total Company $900,000 Sales Variables expenses: Cost of goods sold Sales commissions 579,000 90,000 Total variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income 669,000 231,000 118,000 113,000 72,000 $41,000 Commercial $300,000 153,000 30,000 183,000 117,000 70,000 $47,000 Residential $600,000 426,000 60,000 486,000 114,000 48,000 $66,000 4. Compute the companywide break-even point in dollar sales? (Round intermediate calculations to 3 decimal places and final answer to the nearest whole dollar amount.) Break-even point = ? 5. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount.) Commercial Division Residential Division Break-even point = $179,487 ? 6. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $21,000 and $42,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount.) Break-even point = Commercial Division $206,818 Residential DivisionStep by Step Solution
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