value 1000 points Toxaway Company is a merchandiser that segments its business i
ID: 2539907 • Letter: V
Question
value 1000 points Toxaway Company is a merchandiser that segments its business into two divisions Commercial and Residential The company's accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their break even points and make decisions She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below Company Sales Cost of goods sold $825,000 $275,000 $550,000 555.500154,000 401 500 Gross margin Selling and administrative expenses 69 500121,000148 500 260 000114.000146,000 Net operating income $ 9 500 $ 7.000$ 2 500 In prepari expense is a 10% sales com m son on ai sale Tho comp rns totalfa d rp see e oo sro so of common fixed expenses that would continue to be incurred even it the Commercial or Residential are discontinued. $38,000 of fixed expenses thaf would be avoided if the and $60,000 of fixed expenses that would be avoded if the Commericial s ng these statements, the intern determined that Toxaways only variable selling and administrative segments Residontial segment is dropped be avodedithe comminioial segnent s dropped Required: 1 Do vou aaree with the intern's Type here to searchExplanation / Answer
2a.
3.
4. Break-even point = Total fixed expenses/Contribution margin ratio
Total fixed expenses = $98000 + $79500 = $177500
Contribution margin ratio = Contribution/Sales = $187000/$825000 = 22.667%
Break-even point = $177500/22.667% = $783076.719 = $783077
6.
Commercial Residential Total Selling and administrative expenses 114000 146000 Less variable sales commission 27500 55000 Less traceable fixed expenses 60000 38000 Common fixed expenses $ 26500 53000 79500Related Questions
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