to be two segments. The Company\'s 2017 results are shown below: Segments Total

Question

to be two segments. The Company's 2017 results are shown below: Segments Total Company East Coast West Coast Sales Variable Expenses Contribution Margin Traceable Fixed Expenses Segment Margin Common Fixed Costs Net Operating Income 470,000 $ 200,000 303,000 96,000 209,000 270,000 75,000 195,000 60,000 135,000 110,000 36,000G 74,000 166,000 a. What is the company-wide breakeven point in dollar sales (3 pts)? b. What is the West Coast's breakeven point in dollar sales (3 pts)? c. If the East Coast division was eliminated, how would the Company's net operating income change (direct and amount) (3 pts)? Page 5 of 7

Explanation / Answer

A. Company breakeven point in sale = (Traceable Fixed Cost + Common Fixed Cost) / Contrinution Margin

= (Traceable Fixed Cost + Common Fixed Cost) / (Contrinution Margin / sales)

= ($ 96,000+ $ 43,000) / ($ 305,000 / $ 470,000)

= $ 139,000 / 0.6489

= $ 214,208.7

B. West Cost Brrakeven point in sale = Traceable Fixed Cost / Contrinution Margin

= Traceable Fixed Cost / (Contrinution Margin / sales)

= $ 60,000 / ($ 195,000 / $ 270,000)

= $ 60,000 / 0.7222

= $ 92,464.12

C. Net Oprating Income after eliminating East Cost Division only one division will left that means west coast and company will oneand the same.

So, the net oprating income of the company after eliminating east cost will be $ 56,000 the down fall of $ 110,000 in the net oprating income due to removal of east coast.

Total Company or West coast Sale (A) $ 270,000 Variable expenses (B) $ 75,000 Contribution Margin (C= A-B) $ 195,000 Traceable and Common Fixed Cost (D) $ 139,000 ($ 96,000 + $ 43,000) Net oprating income (E = C - D) $ 56,000

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