Jan Van Voorhis is a florist in Boulder, Colorado. Dividing his clients into two major categories, he provides you with the following income statement. He stresses that, for most florists (including himself), each segment accounts for 50% of total revenues.

Required:
a. Suppose Jan allocates common fixed costs equally between the two segments. Treating each segment as a separate business, determine the breakeven revenue for institutional revenues and for retail revenues. Does Jan's shop, as a whole, break even with these revenues?
b. Assume Jan does not allocate any fixed costs between the two segments (including the traceable fixed costs). Compute Jan's Weighted Contribution Margin Ratio using the product mix provided in the problem text. What is Jan's breakeven revenue?
c. Why do the answers for parts (a) and (b) differ? What key feature of Jan's business is not captured in the answer to part (a)? What do you conclude about the wisdom of allocating common costs and performing breakeven analysis separately by segment?
d. When would a firm perform breakeven analysis for a segment?

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Retail $450,000 150,000 300,000 175,000 125,000 Institutional Total Revenues Variable cost Contribution margin Traceable fixed costs Segment margin Common fixed costs Profit before taxes $450,000 $900,000 420,000 480,000 255,000 225,000 200,000 $25,000 270,000 180,000 80,000 100,000