Question

Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown:

		Total Company			North			South
Sales	$	937,500		$	750,000		$	187,500
Variable expenses		637,500			600,000			37,500
Contribution margin		300,000			150,000			150,000
Traceable fixed expenses		142,000			71,000			71,000
Segment margin		158,000		$	79,000		$	79,000
Common fixed expenses		62,000
Net operating income	$	96,000

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.

(For all requirements, round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar.)

Answer 1

		Total	NORTH	SOUTH
		Amount	%	Amount	%	Amount	%
	Sales	937,500	100.0%	750,000	100.0%	187,500	100.0%
	Less: Variable cost	637,500	68.0%	600,000	80.0%	37,500	20.0%
	Contribution margin	300,000	32.0%	150,000	20.0%	150,000	80.0%
	Less: Traceable fixed cost	142,000	15.1%	71,000	9.5%	71,000	37.9%
	Segment Margin	158,000	16.9%	79,000	10.5%	79,000	42.1%
	Less: Common Fixed cost	62,000	6.6%
	Net Income	96,000	10.2%
Req 1	Break even (Company )= Total Fixed cost / contibution margin ratio
	=(142000+62000)/32%
	637,500
Req 2	Break even (North )= north Fixed cost / contibution margin ratio
	=71000 / 20%
	355,000
Req 3	Break even (South )= South Fixed cost / contibution margin ratio
	=71000 /80%
	88,750