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 $ 990,000 742,500 247,500 147,000 East West Sales Variable expenses Contribution margin Traceable fixed expenses $ 660,000 528,000 132,000 56,000 $ 76,000 $ 330,000 214,500 115,500 91,000 $ 24,500 Segment margin 100,500 Common fixed expenses 65,000 Net operating income $ 35,500 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? Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 Req 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? OYes ONO
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 $ 990,000 742,500 247,500 147,000 East West Sales Variable expenses Contribution margin Traceable fixed expenses $ 660,000 528,000 132,000 56,000 $ 76,000 $ 330,000 214,500 115,500 91,000 $ 24,500 Segment margin 100,500 Common fixed expenses 65,000 Net operating income $ 35,500 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? Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 Req 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? OYes ONO
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Question
Answer full question and both parts.
Transcribed Image Text:Crossfire Company segments its business into two regions-East and West. The company prepared a contribution format
segmented income statement as shown below:
Sales
Variable expenses
Contribution margin
Traceable fixed expenses
Total Company
$ 990,000
742,500
247,500
147,000
East
$ 660,000
528,000
132,000
56,000
$ 76,000
West
$ 330,000
214,500
115.500
91,000
$ 24,500
Segment margin
100,500
65,000
$ 35,500
0:23:30
Common fixed expenses
Net operating income
ped
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?
pok
Complete this question by entering your answers in the tabs below.
Reg 1 to 3
Req 4
Req 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?
OYes
ONo
Transcribed Image Text:Req 1 to 3
Req 4
Req 5
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.
(Round intermediate calculations to 2 decimal places)
She
Break-Even point
Dollar sales for the whole company
Dollar sales for the East region
Dollar sales for the West region
Req 1 to 3
Req 4
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