Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown:
| | | Total Company | | | North | | | South |
| Sales | $ | 937,500 | | $ | 750,000 | | $ | 187,500 |
| Variable expenses | | 637,500 | | | 600,000 | | | 37,500 |
| Contribution margin | | 300,000 | | | 150,000 | | | 150,000 |
| Traceable fixed expenses | | 142,000 | | | 71,000 | | | 71,000 |
| Segment margin | | 158,000 | | $ | 79,000 | | $ | 79,000 |
| Common fixed expenses | | 62,000 | | | | | | |
| Net operating income | $ | 96,000 | | | | | | |
|
Required:
1. Compute the companywide break-even point in dollar sales.
2. Compute the break-even point in dollar sales for the North region.
3. Compute the break-even point in dollar sales for the South region.
Explanation
1.
The companywide break-even point is computed as follows:
| Dollar sales for company to break even | = | Traceable fixed expenses + Common fixed expenses |
| Overall CM ratio |
| | = | $142,000 + $62,000 |
| $300,000 ÷ $937,500 |
2.
The break-even point for the North region is computed as follows:
| Dollar sales for a segment to break even | = | Segment traceable fixed expenses |
| Segment CM ratio |
| | = | $71,000 |
| $150,000 ÷ $750,000 |
3.
The break-even point for the South region is computed as follows:
| Dollar sales for a segment to break even | = | Segment traceable fixed expenses |
| Segment CM ratio |
| | = | $71,000 |
| $150,000 ÷ $187,500 |
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