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Problem 1 (45 pts.): Andarex Corporation has two divisions: the Gadget Division and Gizmo Division. Revenue and cost information relating to the products is as
Problem 1 (45 pts.): Andarex Corporation has two divisions: the Gadget Division and Gizmo Division. Revenue and cost information relating to the products is as follows: Gadget Div Gizmo Diy Units Sold 60,000 50,000 Selling Price per unit S 18.00 $ 17.00 Variable Product Costs per unit S 8.00 8.00 Variable Selling Costs per unit S 3.00 $ 2.50 Total Traceable Fixed Costs S 35,000 $ 90,000 $ Common fixed costs for Andarex are made up of $105,000 in headquarters rent, $25,000 in insurance and $170,000 in other administrative expenses. Required: Prepare a contribution format income statement segmented by division: Total Gadget Div Gizmo Div Sales Variable Costs Contribution Margin Traceable Fixed Costs Segment Margin Common Fixed Costs Net Operating Income What is the company's overall break-even in sales dollars (fixed costs divided by CM%)? (10 pts.) If Andarex spent $70,000 on Gizmo Division advertising to increase total sales in the Gizmo Division by 40%, how much would that change segment margin for the Gizmo Division? (Show your work and indicate INCREASE or DECREASE.) (10 pts.)
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