Shannon Company segments its income statement into its North and South Divisions. The companys overall sales, contribution margin ratio, and net operating income are $760,000, 60%, and $45,600, respectively. The North Divisions contribution margin and contribution margin ratio are $240,000 and 75%, respectively. The South Divisions segment margin is $66,000. The company has $91,200 of common fixed expenses that cannot be traced to either division.

Required:

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))

2

Crossfire Company segments its business into two regionsEast and West. The company prepared the contribution format segmented income statement shown below:

	Total Company		East		West
Sales	$	910,000	$	650,000	$	260,000
Variable expenses		637,000		468,000		169,000
Contribution margin		273,000		182,000		91,000
Traceable fixed expenses		133,000		70,000		63,000
Segment margin		140,000	$	112,000	$	28,000
Common fixed expenses		56,000
Net operating income	$	84,000

Required:

1.	Compute the companywide break-even point in dollar sales. (Round intermediate calculations to two decimal places.)

2.	Compute the break-even point in dollar sales for the East region. (Round intermediate calculations to two decimal places.)

3.	Compute the break-even point in dollar sales for the West region. (Round intermediate calculations to two decimal places.)

4.	Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. (Round intermediate calculations to two decimal places.)

5.

Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?

	Yes
	No