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: Sales Cost of goods sold Gross margin Selling and administrative expenses Total Company $ Net operating $ income Commercial 930,000 623,100 306,900 288,000 18,900 Residential $ 310,000 170,500 139,500 128,000 $ 11,500 $ 620,000 452,600 167,400 160,000 $ 7,400 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $69,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $74,000 of fixed expenses that would be avoided if the Commericial segment is dropped, and $52,000 of fixed expenses that would be avoided if the Residential segment is dropped. 5. Compute the companywide break-even point in dollar sales. 6. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division.
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: Sales Cost of goods sold Gross margin Selling and administrative expenses Total Company $ Net operating $ income Commercial 930,000 623,100 306,900 288,000 18,900 Residential $ 310,000 170,500 139,500 128,000 $ 11,500 $ 620,000 452,600 167,400 160,000 $ 7,400 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $69,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $74,000 of fixed expenses that would be avoided if the Commericial segment is dropped, and $52,000 of fixed expenses that would be avoided if the Residential segment is dropped. 5. Compute the companywide break-even point in dollar sales. 6. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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:
Sales
Cost of goods
sold
Gross margin
Selling and
administrative
expenses
Net operating
income
Total
Company
$
$
Commercial Residential
930,000
623,100
306,900
288,000
18,900
$ 310,000
170,500
139,500
128,000
$ 11,500
$
620,000
452,600
167,400
160,000
$ 7,400
In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales
commission on all sales. The company's total fixed expenses include $69,000 of common fixed expenses that would continue to be
incurred even if the Commercial or Residential segments are discontinued, $74,000 of fixed expenses that would be avoided if the
Commericial segment is dropped, and $52,000 of fixed expenses that would be avoided if the Residential segment is dropped.
5. Compute the companywide break-even point in dollar sales.
6. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division.
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