Crossfire Company segments its business into two regionsEast and West. The company prepared a contribution...
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Accounting
Crossfire Company segments its business into two regionsEast and West. The company prepared a contribution format segmented income statement as shown below:
Total Company
East
West
Sales
$
960,000
$
640,000
$
320,000
Variable expenses
672,000
480,000
192,000
Contribution margin
288,000
160,000
128,000
Traceable fixed expenses
158,000
69,000
89,000
Segment margin
130,000
$
91,000
$
39,000
Common fixed expenses
70,000
Net operating income
$
60,000
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. Use the same format as shown above. What is Crossfires 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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