Problem 7-24 Companywide and Segment Break-Even Analysis; Decision Making [LO7-4, LO7-5 Toxaway Company is a merchandiser that segments its business into two divisions-Commercial 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 Selling and administrative expenses Net operating income Total Company CommercialResidential $930,000 $310,000 $620,000 623,100 17,50 452,60e 306,9e8 139,500 167,400 288,e00 128,00 160,000 $ 18,900 11,p00 7,400 in preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense commission on all sales. The company's total fixed expenses include $69.000 of common fixed expenses that Incurred even if the Commercial or Residential segments are discontinued, $74,000 of fixed expenses that is a 10% sales segment is dropped, and $52.000 of fixed expenses that would be avoided if the Required: . 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 intern's segmented income statement a. How much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed ex Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin? 8. Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Residential segments? Redo the intern's segmented income statement using the contribution format. 5 Compute the companywide break-even point in dollar sales 6. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division 7 Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $23,000 and $46.000, respectively, and to lower its compapywide sales commission break evenpol dollar salesfor he or merca Dois pa y d the Residential Di s percentage from10% to 5% Calculate the new