(Solved Homework): Therrell Corporation has two divisions: Bulb Division and Seed Division. The following report is for the…

Therrell Corporation has two divisions: Bulb Division and Seed Division. The following report is for the most recent operating period:

	Bulb Division		Seed Division
Sales	$	315,000	$	210,000
Variable expenses	$	81,900	$	44,100
Traceable fixed expenses	$	115,240	$	86,100
Common fixed expense	$	28,680	$	19,120

The common fixed expenses have been allocated to the divisions on the basis of sales.

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Required:

a. What is the Bulb Division’s break-even in sales dollars?

b. What is the Seed Division’s break-even in sales dollars?

c. What is the company’s overall break-even in sales dollars?

Expert Answer

Break even point in sales = Total Fixed Expenses / Contribution margin ratio

Contribution margin ratio = Contribution margin / sales

	Bulb division	Seed division	Total company
Sales	$ 315,000	$ 210,000	$ 525,000
Less: Variable cost	$ 81,900	$ 44,100	$ 126,000
Contribution margin	$ 233,100	$ 165,900	$ 399,000
Contribution margin ratio	$233,100/$315,000*100 = 74%	$165,900/$210,000*100 = 79%	$399,000/$525,000*100 = 76%
Break even point in sales dollar	$115,240/74% = $155,729.73	$86,100/79% = $108,987.34	($115,240+$86,100+$28,680+$19,120)/76% = $327,815.79

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