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 East WestSales$900,000 $600,000 $300,000Variable expenses 675,000 480,000 195,000Contribution margin 225,000 120,000 105,000Traceable fixed expenses 141,000 50,000 91,000Segment margin 84,000 $70,000 $14,000Common fixed expenses 59,000 Net operating income$25,000 Required: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 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?

The question is based on the concept of Cost Accounting. Working:While computing the break-even point of each region, company C should not allocate the cost of common fixed expensesbetween the E region and W region. Common fixed expenses should not be allocated to the W region and E region because company incurred the commonfixed expenses irrespective of the production of each region.

Answered: Crossfire Company segments its business…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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		East		West
Sales	$	900,000		$	600,000	$	300,000
Variable expenses		675,000			480,000		195,000
Contribution margin		225,000			120,000		105,000
Traceable fixed expenses		141,000			50,000		91,000
Segment margin		84,000		$	70,000	$	14,000
Common fixed expenses		59,000
Net operating income	$	25,000

Required:

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 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?

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