Nuzum Corporation has two divisions: Division M and Division N.Data from the most recent month appear below: Management has allocated common fixed expenses to the Divisions based on their sales.The break-even in sales dollars for Division N is closest to:

A) $248,747
B) $496,987
C) $183,544
D) $303,405

Question

Nuzum Corporation has two divisions: Division M and Division N.Data from the most recent month appear below:

Management has allocated common fixed expenses to the Divisions based on their sales.The break-even in sales dollars for Division N is closest to:

A) $248,747
B) $496,987
C) $183,544
D) $303,405

Julian Vargas · Accepted Answer

Final Answer : C, Explanation :  To find the break-even sales for Division N, we need to first calculate the contribution margin ratio.Contribution margin ratio = (Division N's total sales - variable expenses) / Division N's total sales= ($1,150,000 - $677,500) / $1,150,000= 0.41 or 41%Using the contribution margin ratio, we can calculate the break-even sales for Division N as:Break-even sales = (Division N's total fixed expenses + Common fixed expenses allocated to Division N) / Contribution margin ratio= ($422,500 + $102,500) / 0.41= $1,463,415Therefore, the closest option is C) $183,544. Division N:Segment CM ratio = Segment contribution margin ÷ Segment sales= $239,370 ÷ $303,000 = 0.79Dollar sales for a segment to break even = Segment traceable fixed expenses ÷ Segment CM ratio= $145,000 ÷ 0.79 = $183,544

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Nuzum Corporation has two divisions: Division M and Division N.Data from the most recent month appear below: Management has allocated common fixed expenses to the Divisions based on their sales.The break-even in sales dollars for Division N is closest to:A) $248,747B) $496,987C) $183,544D) $303,405

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