Gardella Corporation has two divisions: Domestic Division and Foreign Division. The following data are for the most recent operating period:
The common fixed expenses have been allocated to the divisions on the basis of sales.
-The company's overall break-even sales is closest to:
A) $449,317
B) $134,827
C) $470,663
D) $335,836

Question

Gardella Corporation has two divisions: Domestic Division and Foreign Division. The following data are for the most recent operating period:
  The common fixed expenses have been allocated to the divisions on the basis of sales.
-The company's overall break-even sales is closest to:
A) $449,317 
B) $134,827 
C) $470,663 
D) $335,836

Quizplus · Accepted Answer

11ea7761_1836_d087_81a5_c5506e6ba657_TB2580_00 Contribution margin = Sales - Variable expenses
= $480,000 - $176,700 = $480,000
CM ratio = Contribution margin ÷ Sales
= $303,300 ÷ $480,000 = 0.632 (rounded)
Total fixed expenses = Total traceable fixed expenses + Common fixed expenses
= $211,000 + $86,400 = $297,400
Dollar sales to break even = Total fixed expenses ÷ CM ratio
= $297,400 ÷ 0.632 = $470,663 (using the unrounded CM ratio)

Gardella Corporation Has Two Divisions: Domestic Division and Foreign Division