Question-3:

Piedmont Company segments its business into two regionsNorth and South. The company prepared the contribution format segmented income statement as shown below: [10]

Total Company North South

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $600,000 $400,000 $200,000

Variable expenses . . . . . . . . . . . . . . . . . 360,000 280,000 80,000

Contribution margin . . . . . . . . . . . . . . . . 240,000 120,000 120,000

Traceable fixed expenses . . . . . . . . . . . 120,000 60,000 60,000

Segment margin . . . . . . . . . . . . . . . . . . . 120,000 $ 60,000 $ 60,000

Common fixed expenses . . . . . . . . . . . 50,000

Net operating income . . . . . . . . . . . . . . $ 70,000

Requirements:

1. Compute the companywide break-even point in dollar sales.

2. Compute the break-even point in dollar sales for the North region.

3. Compute the break-even point in dollar sales for the South region.

4. If the South Sales increase by 10%, how much net operating income increase if advertisement cost is $ 5,000.