Please please please help me solve this problem on Companywide Segment Break-Even Analysis and Decision Making.
Problem 6-24 Companywide and Segment Break-Even Analysis; De ision Making [LOG-4, LO6-5] Toxaway Company is a merchandiser that segments its business into two divisionsCommercial and Residermal. The companys accounting intern was asked to prepare segmented Income statements that the company's divisional managers could use to calculate their breakeven points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: Total tin-pony ca-er-cial Residential sales 3 846,808 3 280,000 s 560.880 cost of goods sold 557.105 154.000 403.100 Gross margin 282,890 126,006 156,809 Selling and adlinistrative expenses 264,008 116,083 108,939 Net operating income 5 18,800 3 10,000 $ 5.800 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 xed expenses include $78,000 of common xed expenses that would continue to be incurred even ifthe Commercial or Residential segments are discontinued, $62000 of xed expenses that would be avoided If the Commerlclal segment ls dropped. and $40,000 of xed expenses that would be avoided Ifthe Residential segment is dropped Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2 Based on a review of the Intem's segmented Income statement a. How much of the compaan common xed expenses did she allocate to the Commercial and Residential segments? to. Which of the following three allocation bases did she most likely used to allocate common xed expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin? 3. Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Residential segments? 4. Redo the Intem's segmented Income statement using the contribution format 5. Compute the companywide breakeven point in dollar sales. 6. Compute the preak~even point in dollar sales for the Commercial Division and for the Residential DiVlSiOn. 1 Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $12000 and $34,000, 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, complete this question Iry entering your answers In the tabs beiow. Raq: R6114 HH ReqS HH Req6 H Req7 H Reg 1 Req 2A HH Reg 25 Do you agree with the iritem's decision to use an absorption format for her segmented income statement? OYes ONO Reg 1 Reg ZA Req 25 Reg 3 Reg 4 Reg 5 Req 6 Reg 7 Based on a review of the intern's segmented Income statement, how much of the company's common xed expenses did she allocate to the Commercial and Residential segments? Common xed expenses Reqa Req4 H Reqs Reqs HH Req7 Reg 1 Req 2A Based on a review of the Intem's segmented Inoome statement, which of the following three allocation bases did she most likely used to allocate common xed expenses to the Commercial and Residential segments? Osales Ocost of goods sold OGross margin Reql RquA HH RquB Regs H Reqs HH Req7 Do you agree with the Intem's decision to allocate the common xed expenses to the Commercial and Residential segments? I I' i' Ii II Redo the intem's segmented income statement using the contribution format. Reg 1 Reg ZA Raq 23 Raqz H m4 ReqS Reqs HH Req7 H compute the companywide break-even point in dollar sales. (Round intemiedlate calculations to 3 decimal places and nal answer to the nearest whole dollar amount.) _:I Reql HH Requ H ReoZB H Reqa i Req4 H Req5 Reqs Req7 H 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 nal answer to the nearest whole dollar amount.) Breakeven point Assume the company decided to pay its sales representatives in the commercial and Residential Divisions a total monthly salary of $17,000 and $34,000, 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 nal answers to the nearest whole dollar amount.) Stow BSA Break-even point
