Raner, Harris and Chan is a consulting firm specializing in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given below: Total Company Office Chicago Minneapolis Sales $ 490,500 100.00% $ 163,500 100.00% $ 327,000 100.00% Variable expenses 245,250 50.00% 49,050 30.00% 196,200 60.00% Contribution margin 245,250 50.00% 114,450 70.00% 130,800 40.00% Traceable fixed expenses 137,340 28.00% 85,020 52.00% 52,320 16.00% Office segment margin 107,910 22.00% $ 29,430 18.00% $ 78,480 24.00% Common fixed expenses not traceable to offices 68,670 14.00% Net operating income $ 39,240 8.00% 2. How much would the company’s net operating income increase if Minneapolis increased its sales by $81,750 per year? Assume no change in cost behavior patterns.
Raner, Harris and Chan is a consulting firm specializing in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given below: Total Company Office Chicago Minneapolis Sales $ 490,500 100.00% $ 163,500 100.00% $ 327,000 100.00% Variable expenses 245,250 50.00% 49,050 30.00% 196,200 60.00% Contribution margin 245,250 50.00% 114,450 70.00% 130,800 40.00% Traceable fixed expenses 137,340 28.00% 85,020 52.00% 52,320 16.00% Office segment margin 107,910 22.00% $ 29,430 18.00% $ 78,480 24.00% Common fixed expenses not traceable to offices 68,670 14.00% Net operating income $ 39,240 8.00% 2. How much would the company’s net operating income increase if Minneapolis increased its sales by $81,750 per year? Assume no change in cost behavior patterns.
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