kneeland corporation has two divisions: grocery division and convenience divisio
ID: 2527633 • Letter: K
Question
kneeland corporation has two divisions: grocery division and convenience division. the following ... Question: Kneeland Corporation has two divisions: Grocery Division and Convenience Division. The following ... (1 bookmark) Kneeland Corporation has two divisions: Grocery Division and Convenience Division. The following report is for the most recent operating period: Total Company Grocery Division Convenience Division Sales $ 427,000 $ 321,000 $ 106,000 Variable expenses 119,380 70,620 48,760 Contribution margin 307,620 250,380 57,240 Traceable fixed expenses 239,000 194,000 45,000 Segment margin 68,620 56,380 12,240 Common fixed expense 46,970 35,310 11,660 Net operating income $ 21,650 $ 21,070 $ 580 The common fixed expenses have been allocated to the divisions on the basis of sales.
Required: d. What would be the company's overall net operating income if the company operated at its two division's break-even points? ***in detail please
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Explanation / Answer
SEGMENT-WISE INCOME STATEMENT TOTAL GROCERY CONVENIENCE AMOUNT $ AMOUNT $ AMOUNT $ Sales Revenue 427,000 321,000 106,000 Less: Variable expense 119,380 70,620 48,760 Contribution Margin 307,620 250,380 57,240 Less: Traceable Fixed cost 239,000 194,000 45,000 SEGMENT MARGIN 68,620 56,380 12,240 Less: Common Fixed cost 46,970 Net Operating Income 21,650 CM ratio of each division (Contribution/ sales*100) Grocery: (250380/321000*100): 78% Convenience: (57240/106000*100): 54% Break even for Division: Traceable Fixed cost/ CM ratio Grocery: 194,000/78% = $248718 Convenience: 45000/54% = $83,333 Total sales for company(when division at break even): 332051 (248718+83333) Total contribution for the company 239000 (traceable fixed cost recovered) Total Fixed cost for t he company 285970 (Traceable and common Fixed cost) Net Operating loss -46970
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