Neelon Corporation has two divisions: Southern Division and Northern Division. T

Question

Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period:

The common fixed expenses have been allocated to the divisions on the basis of sales.

The company’s overall break-even sales is closest to:

$272,067

$328,299

$114,341

$386,408

Total Company Southern Division Northern Division Sales $ 418,000 $ 193,000 $ 225,000 Variable expenses $ 130,880 $ 79,130 $ 51,750 Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000 Common fixed expense $ 79,420 $ 36,670 $ 42,750

Explanation / Answer

Overall contribution margin ratio = (418000-130880)/418000= 68.689% Company’s overall break-even sales = Fixed expenses/CM ratio = (186000+79420)/68.689%= 386408 Option 4 is correct

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