Problem 6-24 (Algo) Companywide and Segment Break-Even Analysis; Decision Making [LO6-4, LO6-5] Toxaway Company is a merchandiser that segments its business into two divisionsCommercial and Residential. The company's accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their breakeven points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: Total Company Commercial Residential Sales $ 355,000 $ 285,000 $ 570,000 Cost of goods sold 564,300 153,900 410,400 Gross margin 290,700 131,100 159,600 Selling and administrative expenses 268,000 118,000 150,000 Net operating income S 22,700 $ 13,100 S 9,600 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $76,500 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $64,000 of fixed expenses that would disappear if the Commercial segment is dropped, and $42,000 of fixed expenses that would disappear ifthe Residential segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2. Based on a review of the intern's segmented income statement. a. How much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin? 3. Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Residential segments? 4. Redo the intern's segmented income statement using the contribution format. 5. Compute the companywide breakeven point in dollar sales. 6. Compute the breakeven point in dollar sales for the Commercial Division and for the Residential Division. 7. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $18,000 and $36,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. x Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 3 Reg 4 Req 5 Req 6 Reg 7 Redo the intern's segmented income statement using the contribution format. Toxaway Company Income Statement Total Company Commercial Residential Sales ~ $ 855,000 $ 285,000 $ 570,000 Variable expenses: Cost of goods sold V 564,300 153,900 410,400 Sales commissions V 85,500 28,500 57,000 Total variable expenses 649,800 182,400 467,400 205,200 102,600 102,600 106,000 Segment margin V 99,200 $ 102,600 $ 102,600 Net operating income $ 99,200