Jan Van Voorhis is a florist in Boulder, Colorado. Dividing his clients into two major categories, he provides you with the following income statement. He stresses that, for most florists (including himself), each segment accounts for 50% of total revenues.

	Retail	Institutional	Total
Revenues	$450,000	$450,000	$900,000
Variable cost	150,000	270,000	420,000
Contribution margin	300,000	180,000	480,000
Traceable fixed costs	175,000	80,000	255,000
Segment margin	125,000	100,000	225,000
Common fixed costs			200,000
Profit before taxes			$25,000

Required

1. Suppose Jan allocates common fixed costs equally between the two segments. Treating each segment as a separate business, determine the breakeven revenue for institutional revenues and for retail revenues. Does Jans shop, as a whole, break even with these revenues?

2. Assume Jan does not allocate any fixed costs between the two segments (including the traceable fixed costs). Compute Jans Weighted Contribution Margin Ratio using the product mix provided in the problem text. What is Jans breakeven revenue?

3. Why do the answers for parts (1) and (2) differ? What key feature of Jans business is not captured in the answer to part (1)? What do you conclude about the wisdom of allocating common costs and performing breakeven analysis separately by segment?

4. When would a firm perform breakeven analysis for a segment?