Towaway Company is a merchandises that segments its business into two divisions -Commeicial and Residential. The company's accounting intern was asked to prepare segriented income statements that the companys divisional managers could use to calculete formit segmented income statement shown below: In preparing these statements, the intern determined that Toxaways only varlable-selling and administrative expense is a to\% sales commission on all saies. The company's total foxed expenses include $76,500 of common foxed expenses that would continue to be incurret teren if the Commeretal or Residential segments are discontinued. 564,000 of fixed expenses that would disappear if the Commercal segment is dropped and $42.000 of foxed experses that would disappear if the Residential segment is dropped Bequired: b. Which af the following three allocation lannes dict she most likely used to alocate cammon fixed experses to the Comin ercial and If Camoute the samuarmavide arask-even point in dallai sales: In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales comimission on all sales. The company's total fixed expenses include $76,500 of common fixed expenses that would continue to be incured even if the Commercial or Residental segments are discontanued, $64,000 of fixed experises that would disappear if the Commercial segment is dropped, and $42.000 of fixed expenses that would disappear if the Residential segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented incorne 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 expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin? 3. Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Residentiat segrments? 4. 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 $18,000 and $36,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division