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Gough Corporation has two divisions: Domestic and Foreign
Gough Corporation has two divisions: Domestic and Foreign. Data from the most recent month
appears below:
Total company Domestic Foreign
Sales $668,000 $347,000 $321,000
Variable expenses 220,530 72,870 147,660
Contribution margin 447,470 274,130 173,340
Traceable fixed expenses 335,000 201,000 134,000
Segment margin 112,470 73,130 39,340
Common fixed expenses 73,480
Net operating income 38,990
The break-even in sales dollars for the company as a whole is closest to:
a) $502,579
b) $107,216
c) $609,794
d) $436,424
Expert Solution
Computation of the break even sales in dollars:-
Contribution margin ratio = Contribution margin / Sales
= $447,470 / $668,000
= 66.99%
Fixed cost = Traceable fixed expenses + Common fixed expenses
= $335,000 + $73,480
= $408,480
Break even sales in dollars = Fixed cost / Contribution margin ratio
= $408,480 / 66.99%
= $609,794.27 Or $609,794
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