Reference no: EM131678517

Question - Crossfire Company segments its business into two regions-East and West. The company prepared a contribution format segmented income statement as shown below:

	Total Company	East	West
Sales	$750,000	$500,000	$250,000
Variable expenses	525,000	375,000	150,000
Contribution margin	225,000	125,000	100,000
Traceable fixed expenses	340,000	60,000	80,000
Segment margin	85,000	$65,000	$20,000
Common fixed expenses	70,000
Net operating income	$15,000

Required:

1. Compute the companywide break-even point in dollar sales.

2. Compute the break-even point in dollar sales for the East region.

3. Compute the break-even point in dollar sales for the West region.

4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfire's net operating income (loss) in your new segmented income statement?

5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?