Pevy Corporation has two divisions: Southern Division and Northern 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 Southern Division's break-even sales is closest to:
A)$150,746
B)$183,582
C)$286,163
D)$205,254

Question

Pevy Corporation has two divisions: Southern Division and Northern 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 Southern Division's break-even sales is closest to:
A)$150,746 
B)$183,582 
C)$286,163 
D)$205,254

Quizplus · Accepted Answer

Segment contribution margin = Segment sales - Segment variable expenses
= $200,000 - $66,000 = $134,000
Segment CM ratio = Segment contribution margin ÷ Segment sales
= $134,000 ÷ $200,000 = 0.670
Dollar sales for a segment to break even = Traceable fixed expenses ÷ Segment CM ratio
= $101,000 ÷ 0.670 = $150,746

Pevy Corporation Has Two Divisions: Southern Division and Northern Division