Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 910,000 $ 650,000 $ 260,000 Variable expenses 637,000 468,000 169,000 Contribution margin 273,000 182,000 91,000 Traceable fixed expenses 133,000 70,000 63,000 Segment margin 140,000 $ 112,000 $ 28,000 Common fixed expenses 56,000 Net operating income $ 84,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 910,000 $ 650,000 $ 260,000 Variable expenses 637,000 468,000 169,000 Contribution margin 273,000 182,000 91,000 Traceable fixed expenses 133,000 70,000 63,000 Segment margin 140,000 $ 112,000 $ 28,000 Common fixed expenses 56,000 Net operating income $ 84,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below:
| Total Company | East | West | ||||||
| Sales | $ | 910,000 | $ | 650,000 | $ | 260,000 | ||
| Variable expenses | 637,000 | 468,000 | 169,000 | |||||
| Contribution margin | 273,000 | 182,000 | 91,000 | |||||
| Traceable fixed expenses | 133,000 | 70,000 | 63,000 | |||||
| Segment margin | 140,000 | $ | 112,000 | $ | 28,000 | |||
| Common fixed expenses | 56,000 | |||||||
| Net operating income | $ | 84,000 | ||||||
Required:
1. Compute the companywide break-even point in dollar sales.
2. Compute the break-even point in dollar sales for the East region.
3. Compute the break-even point in dollar sales for the West region.
4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement?
5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
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