Question

Piedmont Company segments its business into two regions-North and South. The company prepared the contribution format segmented income statement as shown: Sales Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income Total Company $ 600,000 360,000 240,000 120,000 120,000 50,000 $ 70,000 North $ 400,000 280,000 120,000 60,000 $ 60,000 South $ 200,000 80,000 120,000 60,000 $ 60,000 Required: 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. 1. Dollar sales for company to break-even 2. Dollar sales for North segment to break-even 3. Dollar sales for South segment to break-even

Answer 1

1	Dollar sales for company to break - even	=	$                    4,25,000
2	Dollar sales for North segment to break - even	=	$                    2,00,000
3	Dollar sales for South segment to break - even	=	$                    1,00,000
	Workings:
	Contribution margin ratio	=	Total Contribution / Total Sales
	Break-even point in dollars	=	Total Fixed costs /Contribution margin ratio
		Total Company	North	South
(i)	Sales	$ 6,00,000	$                    4,00,000	$                           2,00,000
(ii)	Contribution Margin	$ 2,40,000	120000	$                           1,20,000
(iii) = (ii)/(i)	Contribution margin ratio	40%	30%	60%
(iv)	Fixed expenses	$ 1,70,000	60000	$                               60,000
(iv)/(iii)	Break-even point in dollars	$ 4,25,000	$                    2,00,000	$                           1,00,000