Delisa Corporation has two divisions: Division L and Division Q.Data from the most recent month appear below: The break-even in sales dollars for Division Q is closest to:
A)$352,635
B)$234,615
C)$403,635
D)$512,742

Question

Delisa Corporation has two divisions: Division L and Division Q.Data from the most recent month appear below:  The break-even in sales dollars for Division Q is closest to:
A)$352,635 
B)$234,615 
C)$403,635 
D)$512,742

Quizplus · Accepted Answer

To find the break-even point for Division Q, we need to use the contribution margin ratio. 
Contribution margin ratio = (Sales - Variable expenses) / Sales
For Division Q:
Contribution margin ratio = ($431,000 - $231,000) / $431,000 = 0.465
Now we can use the following formula to find the break-even point:
Break-even = Fixed expenses / Contribution margin ratio
For Division Q:
Break-even = $85,000 / 0.465 = $182,796.68
Therefore, the closest option is B) $234,615. Division Q:
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $187,720 ÷ $361,000 = 0.52
Dollar sales for a segment to break even = Segment traceable fixed expenses ÷ Segment CM ratio
= $122,000 ÷ 0.52 = $234,615

Delisa Corporation Has Two Divisions: Division L and Division Q