Gulinson Corporation has two divisions: Division A and Division B.Data from the most recent month appear below: The break-even in sales dollars for Division A is closest to:
A)$134,694
B)$184,531
C)$487,179
D)$267,367

Question

Gulinson Corporation has two divisions: Division A and Division B.Data from the most recent month appear below:  The break-even in sales dollars for Division A is closest to:
A)$134,694 
B)$184,531 
C)$487,179 
D)$267,367

Quizplus · Accepted Answer

To calculate the break-even point for Division A, we need to use the contribution margin ratio (CMR) formula: 
CMR = (Sales - Variable Costs) / Sales 
We have the following information for Division A: 
- Sales = $875,000 
- Variable Costs = $262,500 + 0.15(Sales) = $393,750 
Plugging these numbers into the CMR formula: 
CMR = ($875,000 - $393,750) / $875,000 = 0.55 
To find the break-even point, we need to divide the total fixed costs by the CMR: 
Break-even point = Total Fixed Costs / CMR 
We are given that the total fixed costs for Division A are $74,583. 
Break-even point = $74,583 / 0.55 = $135,605, which is closest to option A: $134,694. Division A:
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $108,780 ÷ $222,000 = 0.49
Dollar sales for a segment to break even = Segment traceable fixed expenses ÷ Segment CM ratio
= $66,000 ÷ 0.49 = $134,694

Gulinson Corporation Has Two Divisions: Division a and Division B