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In Part 2 (b) of the previous question, you calculated a profit or loss if Jewel Clasps sells exactly the break-even quantity of each of its three products. What is the primary reason for the result you obtained in Part 2 (b) of the Jewel Clasps case?

When a company sells at the segment level break-even point, its sales are not high enough to cover (pay for) its common fixed expenses.

Selling at the segment level break-even point means that the company is able to cover (pay for) all of its fixed expenses, no matter whether they are traceable or common.

When a company sells at the segment level break-even point, its sales are not high enough to cover (pay for) its traceable fixed expenses.

When a company sells at the segment level break-even point, its sales are not high enough to cover (pay for) its variable expenses.

Which of the following statements is true? There may be more than one answer:

Possible answers:

1. A segment's contribution margin minus its traceable fixed expenses equals the segment margin.
2. Allocating a portion of common fixed costs to a segments real costs may make an otherwise profitable segment appear to be unprofitable.
3. A company's common fixed costs should be evenly allocated to business segments when computing the dollar sales for a segment to break break even.
4. A segment's traceable fixed costs should include only those costs that will disappear over time if the segment disappears.

The true statements are: #1, #2, and #4.

The true statements are: #1, #2, #3, and #4.

The true statements are: #1 and #2.

The true statements are: #1, #2, and #3.

Every period, Jewel Clasps incurs a number of different fixed costs, some of which are listed here:

1. The salary of the Silver product line manager
2. Salaries of the CEO and CFO
3. Rent on the corporate headquarters
4. Fees paid to advertise an anti-tarnish kit that can be purchased with Copper clasps
5. Straight-line depreciation on the machine used to plate the Gold clasps with a special alloy

Which of the costs above are traceable to one of Jewel's product lines? Select the best answer:

#1, #4, and #5 are traceable fixed costs with respect to a product line.

# 2 & #3 are traceable fixed costs with respect to a product line.

# 1, #2 & #4, and #5 are traceable fixed costs with respect to a product line.

#4 and #5 are traceable fixed costs with respect to a product line.

Susan Lo called her boss, Phil Takata, the vice president of sales at Jewel Clasps Corporation: Phil, I'm not sure how to go about answering the questions that came up at the meeting with the CEO yesterday What's the challenge? The CEO wanted to know the break-even point for each of the company's products, but I am having trouble figuring them out Tm sure you can handle it, Susan. And, by the way, I need your analysis on my desk tonight before you leave in time for my follow-up meeting at 8:00 a.m. Jewel Clasps Corporation makes three different types of jewelry clasps in its manufacturing facility in North Carolina. Data concerning these products appear below Gold 105,000 51.40 ,000 405 Normal annual sales volume Unit selling price Variable expense 206 ,000 51.10 0.44 51.60 per unit 5.64 Total fixed expenses are S459,000 per year. All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacoeptable numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories. *TIP: To answer the questions below, it will be most helpful if you prepare segmented income statements as illustrated in your textbook (-page 283) Required 1. What is the company's over-all break-even point in dollar sales? (Round CM ratio to 4 decimal places and final answer to the nearest thousand dollars. For example: round 0.64894 to 0.6489;and round 975,434 to 975,000) -even 2. Of the total foxed expenses of S459,000, $23,100 could be avoided if the Gold product is diropped, 100,800 if the Silver product is dropped, and S69,300 if the Copper product is dropped. The remaining fixed expenses of $265,800 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely. a. What is the break-even point in unit sales for each product? (Do not round intermediate calculations.) Break-even point in unit sales b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? (Do not round intermediate calculations.)

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