Exercise 7-16 Working with a Segmented Income Statement; Break-Even Analysis [LO7-4, LO7-5]

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Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the companys most recent year is given:

							Office
	Total Company						Chicago						Minneapolis
Sales	$	412,500		100.0	%		$	82,500		100	%		$	330,000		100	%
Variable expenses		222,750		54.0	%			24,750		30	%			198,000		60	%
Contribution margin		189,750		46.0	%			57,750		70	%			132,000		40	%
Traceable fixed expenses		92,400		22.4	%			42,900		52	%			49,500		15	%
Office segment margin		97,350		23.6	%		$	14,850		18	%		$	82,500		25	%
Common fixed expenses not traceable to offices		66,000		16.0	%
Net operating income	$	31,350		7.6	%

Exercise 7-16 Part 1

Required:

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

1-b. Compute the break-even point for the Chicago office and for the Minneapolis office.

1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?