Question
Raner, Harris and Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago
Raner, Harris and Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the companys most recent year is given:
| Total Company | Office | |||||
|---|---|---|---|---|---|---|
| Chicago | Minneapolis | |||||
| Sales | $ 531,000 | 100.00% | $ 177,000 | 100.00% | $ 354,000 | 100.00% |
| Variable expenses | 265,500 | 50.00% | 53,100 | 30.00% | 212,400 | 60.00% |
| Contribution margin | 265,500 | 50.00% | 123,900 | 70.00% | 141,600 | 40.00% |
| Traceable fixed expenses | 148,680 | 28.00% | 92,040 | 52.00% | 56,640 | 16.00% |
| Office segment margin | 116,820 | 22.00% | $ 31,860 | 18.00% | $ 84,960 | 24.00% |
| Common fixed expenses not traceable to offices | 74,340 | 14.00% | ||||
| Net operating income | $ 42,480 | 8.00% | ||||
Required:
1-a. Compute the companywide break-even point in dollar sales.
1-b. Compute the break-even point for the Chicago office and for the Minneapolis office.
1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?
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Financial Accounting Group
Authors: Ilse Lubbe, Shelley Herbert, Goolam Modack
1st Edition
0195998634, 9780195998634
