Wyrich Corporation has two divisions: Blue Division and Gold Division. The follo

Question

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

The Gold Division’s break-even sales is closest to:

Multiple Choice

$518,750

$261,043

$102,174

$142,043

Total Company Blue Division Gold Division Sales $ 522,000 $ 391,000 $ 131,000 Variable expenses 160,670 89,930 70,740 Contribution margin 361,330 301,070 60,260 Traceable fixed expenses 286,000 239,000 47,000 Segment margin 75,330 $ 62,070 $ 13,260 Common fixed expenses 73,080 Net operating income $ 2,250

Explanation / Answer

break-even sales = Traceable fixed expenses/ Contribution Margin ratio *100

= $ 47,000 /46%

= $ 102,173.913

= $ 102,174

Hence the correct answer is $ 102,174

Note :

Contribution Margin ratio = (Sales - Variable Cost ) / Sales *100

= ($ 131,000 - $70,740) / $ 131,000 *100

= 46%

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