Question

Kadle Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below: Total Company Division L Division Q Sales $708,250 $336,750 $371,500 Variable expenses 269,830 121,230 148,600 Contribution margin 438,420 215,520 222,900 Traceable fixed expenses 321,200 203,600 117,600 Segment margin 117,220 $11,920 $105,300 Common fixed expenses 79,050 Net operating income $38,170 The break-even in sales dollars for Division Q is closest to:

Answer 1

Answer:

BEP Division Q 196,000

Explanation:

$\frac{Contribution Margin}{Sales Revenue} = Contribution Margin Ratio$

Division Q Contribution Margin 222,900

Division Q Sales                          371,500

222,900/371,500 = 0.6 CM Division Q

This means for every dollar of sales, $0.60 is contribution.

$\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Break\: Even\: Point_{dollars}$

Fixed Cost Division Q 117,600

117,600/0.6 = 196,000 BEP

Division Q needs to sale for 196,000 to pay it's fixed cost.