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

Total Company Division M Division N
Sales $404,000 $181,000 $223,000
Variable expenses 152,130 65,160 86,970
Contribution margin 251,870 115,840 136,030
Traceable fixed expenses 192,000 87,000 105,000
Segment margin 59,870 28,840 31,030
Common fixed expenses 52,520 23,530 28,990
Net operating income $7,350 $5,310 $2,040

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. $172,131
b. $219,656
c. $258,230
d. $392,211

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Answer:

Break-even point (dollars)=  $219,656

Explanation:

Giving the following information:

Division N

Sales= $223,000

Variable expenses= 86,970

Contribution margin= 136,030

Traceable fixed expenses= 105,000

Segment margin= 31,030

Common fixed expenses= 28,990

To calculate the break-even point in dollars for Division N, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

contribution margin ratio= (sales - variable costs) / sales

Break-even point (dollars)= (105,000 + 28,990) / (136,030/223,000)

Break-even point (dollars)=  $219,656