Kadle 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)$262,742
B)$506,955
C)$153,030
D)$199,121

Question

Kadle 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)$262,742 
B)$506,955 
C)$153,030 
D)$199,121

Quizplus · Accepted Answer

To calculate the break-even point in sales dollars for Division Q, we need to use the contribution margin ratio (CMR):

CMR = (Sales - Variable Costs) / Sales

For Division Q:

CMR = ($1,751,000 - $1,246,500) / $1,751,000 
CMR = 0.287

We can use the CMR to calculate the break-even point:

Break-even = Fixed Costs / CMR

For Division Q:

Break-even = $100,000 / 0.287 
Break-even = $348,432

Therefore, the closest answer is C) $153,030, which is less than half of the calculated break-even point.

Kadle Corporation Has Two Divisions: Division L and Division Q