Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period: The company's overall break-even sales is closest to:
A) $412,564
B) $506,409
C) $518,750
D) $106,186

Question

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:  The company's overall break-even sales is closest to:
A) $412,564 
B) $506,409 
C) $518,750 
D) $106,186

Quizplus · Accepted Answer

The company's overall break-even sales is the sum of the break-even sales for both divisions, which is calculated as follows:
Blue Division break-even sales = fixed costs / contribution margin ratio = $400,000 / ($1,000,000 - $500,000) = $800,000
Gold Division break-even sales = fixed costs / contribution margin ratio = $150,000 / ($600,000 - $300,000) = $300,000
Overall break-even sales = $800,000 + $300,000 = $1,100,000 ≈ $518,750. Therefore, the closest answer choice is C ($518,750).

Wyrich Corporation Has Two Divisions: Blue Division and Gold Division