Carriveau Corporation has two divisions: Consumer Division and Business Division. The following data are for the most recent operating period: The company's common fixed expenses total $63,360.The Consumer Division's break-even sales is closest to:
A) $215,942
B) $268,710
C) $488,153
D) $307,768

Question

Carriveau Corporation has two divisions: Consumer Division and Business Division. The following data are for the most recent operating period:  The company's common fixed expenses total $63,360.The Consumer Division's break-even sales is closest to:
A) $215,942 
B) $268,710 
C) $488,153 
D) $307,768

Quizplus · Accepted Answer

To find the break-even sales for the Consumer Division, we need to calculate the contribution margin ratio.

Contribution margin ratio = (Sales - Variable expenses) / Sales

For the Consumer Division:

Contribution margin ratio = (495,000 - 330,000) / 495,000 = 0.333

To find the break-even sales, we can use the following formula:

Break-even sales = (Fixed expenses + Net income) / Contribution margin ratio

Since the division is at break-even, the net income is 0.

Break-even sales = Fixed expenses / Contribution margin ratio

Break-even sales = 63,360 / 0.333 = 190,270

Therefore, the Consumer Division's break-even sales is closest to $215,942 (option A).

Carriveau Corporation Has Two Divisions: Consumer Division and Business Division