Question

Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given below:

  

					Office
	Total Company				Chicago				Minneapolis
Sales	$	600,000	100.0	%	$	120,000	100	%	$	480,000	100	%
Variable expenses		324,000	54.0	%		36,000	30	%		288,000	60	%
Contribution margin		276,000	46.0	%		84,000	70	%		192,000	40	%
Traceable fixed expenses		134,400	22.4	%		62,400	52	%		72,000	15	%
Office segment margin		141,600	23.6	%	$	21,600	18	%	$	120,000	25	%
Common fixed expenses not     traceable to offices		96,000	16.0	%
Net operating income	$	45,600	7.6	%
1-a. Compute the companywide break-even point in dollar sales. (Round "CM ratio" to 2 decimal places and final answer to the nearest whole dollar amount.)

          

1-b.	Compute the break-even point for the Chicago office and for the Minneapolis office. (Round "CM ratio" to 2 decimal places and final answers to the nearest whole dollar amount.)

          

1-c.	Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?
	Greater than Less than Equal to

Answer 1