Solved:
Answered by AI, Verified by Human Experts
Combe Corporation has two divisions: Alpha and Beta. Data from the most recent month appear below:
Combe Corporation has two divisions: Alpha and Beta. Data from the most recent month appear below: Alpha-Beta
Sales $190,000-$315,000
Variable expenses $58,900-$151,200
Traceable fixed expenses $99,000-$107,000
The company's common fixed expenses total $80,800. The break-even in sales dollars for Alpha Division is closest to:
a) $491,129
b) $143,478
c) $187,536
d) $260,580
Final answer:The break-even point in sales dollars for Alpha Division is calculated by dividing its traceable fixed expenses by the contribution margin ratio, resulting in approximately $143,478. so,the correct option is:(b) $143,478Explanation:To calculate the break-even point for Alpha Division of Combe Corporation, we must take into consideration only the traceable fixed expenses for Alpha, ignoring Beta's finances and the common fixed expenses as they would be apportioned across the whole company. The break-even point in sales dollars is found by dividing the traceable fixed expenses by the contribution margin ratio (contribution margin divided by sales). First, we calculate the contribution margin for Alpha: $190,000 (sales) - $58,900 (variable expenses) = $131,100. Next, we calculate the contribution margin ratio: $131,100 / $190,000 = 0.69. Finally, we divide Alpha's traceable fixed expenses by the contribution margin ratio to find the break-even point: $99,000 / 0.69 = approximately $143,478....