Asked by Ahmed Nasser on May 08, 2024
Verified
Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below: The break-even in sales dollars for Division Q is closest to:
A) $352,635
B) $234,615
C) $403,635
D) $512,742
Break-Even
The point at which total revenues equal total costs, resulting in no profit or loss for the business.
Sales Dollars
A measurement of revenue generated from the sale of goods or services, expressed in monetary units.
Net Operating Income
The total profit of a company after operating expenses are deducted from operating revenues, but before interest and taxes are deducted.
- Estimate the break-even points for distinct divisions along with the company collectively.
Verified Answer
Break-even = Fixed costs / Contribution margin ratio
For Division Q, the fixed costs are $410,800 ($248,800 + $162,000), and the contribution margin ratio is 30% ($879,000 / $2,930,000).
Thus, Break-even = $410,800 / 0.3 = $1,369,333
However, we are only looking for the break-even in sales dollars for Division Q, so we need to subtract Division L's contribution margin from the total contribution margin:
Division Q's break-even in sales dollars = ($1,369,333 - ($2,930,000 x 0.25)) / 0.3 = $234,615
Therefore, the closest answer choice is B) $234,615.
Learning Objectives
- Estimate the break-even points for distinct divisions along with the company collectively.
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