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 $ 885,000 572,300 312,700 276,000 $ 36,700 Commercial Residential $ 295,000 $ 590,000 153,400 418,900 141,600 171, 100 122,000 154,000 $ 19,600 $ 17,100 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $73,500 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $68,000 of fixed expenses that would be avoided if the Commercial segment is dropped, and $46,000 of fixed expenses that would be avoided if the Residential segment is dropped. Required: 1. 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 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 Residential segments? 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 $20,000 and $40,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new 1. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $20,000 and $40,000, 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. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Reg 2B Reg 3 Reg 4 Reg 5 Reg 6 Req 7 Do you agree with the intern's decision to use an absorption format for her segmented income statement? Yes ONO Req1 Req 2A > Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 3 Req 4 Reg 5 Req 6 Reg 7 Based on a review of the intern's segmented income statement, how much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? Commercial $ 29,500 Residential $ 59,000 Common fixed expenses - Req1 Req 2B > Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req3 Req 4 Req 5 Req 6 Req 7 Based on a review of the intern's segmented income statement, which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and Residential segments? Sales O Cost of goods sold Gross margin Complete this question by entering your answers in the tabs below. Req 1 Reg 2A Reg 2B Req3 Reg 4 Reg 5 Req 6 Req 7 Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Residential segments? Yes ONO Req 1 Req 2A Req 2B Req3 Req 4 Req 5 Req 6 Redo the intern's segmented income statement using the contribution format. Toxaway Company Income Statement Total Company $ 885,000 Commercial Residential $ 295,000/ $ 590,000 Sales Variable expenses: Cost of goods sold Sales commissions 572,300 88,500 153,400 29,500 418,900 59,000 182,900 477,900 Total variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses 660,800 224, 200 114,000 110,200 73,500 112,100 68,000 44,100 112,100 46,000 66,100 $ $ Net operating income $ 36,700 Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req3 Req 4 Req 5 Req 6 Req 7 Compute the companywide break-even point in dollar sales. (Round intermediate calculations to 3 decimal places and final answer to the nearest whole dollar amount.) Break-even point $ 740,132 Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Reg 3 Reg 4 Req 5 Req 6 Req 7 Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. (Round CM ratio to 2 decimal places and final answer to the nearest whole dollar amount.) Commercial Division $ 178,947 Residential Division $ 242,105 Break-even point Req 1 Req 2A Reg 2B Req3 Reg 4 Req 5 Req 6 Req 7 Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $20,000 and $40,000, 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. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount.) Show less Commercial Division Residential Division Break-even point