Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one 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 company’s most recent year is given: Total Company Office Chicago Minneapolis Sales $ 508,500 100.00% $ 169,500 100.00% $ 339,000 100.00% Variable expenses 254,250 50.00% 50,850 30.00% 203,400 60.00% Contribution margin 254,250 50.00% 118,650 70.00% 135,600 40.00% Traceable fixed expenses 142,380 28.00% 88,140 52.00% 54,240 16.00% Office segment margin 111,870 22.00% $ 30,510 18.00% $ 81,360 24.00% Common fixed expenses not traceable to offices 71,190 14.00% Net operating income $ 40,680 8.00% rev: 06_09_2020_QC_CS-215744, 09_15_2020_QC_CS-220558, 11_04_2020_QC_CS-238526, 03_30_2021_QC_CS-258090 Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4] Assume that Minneapolis’ sales by major market are: Minneapolis Market Medical Dental Sales $ 339,000 100.00% $ 226,000 100.00% $ 113,000 100.00% Variable expenses 203,400 60.00% 144,640 64.00% 58,760 52.00% Contribution margin 135,600 40.00% 81,360 36.00% 54,240 48.00% Traceable fixed expenses 37,290 11.00% 13,560 6.00% 23,730 21.00% Market segment margin 98,310 29.00% $ 67,800 30.00% $ 30,510 27.00% Common fixed expenses not traceable to markets 16,950 5.00% Office segment margin $ 81,360 24.00% The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,650. Marketing studies indicate that such a campaign would increase sales in the Medical market by $45,200 or increase sales in the Dental market by $39,550. Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?
Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one 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 company’s most recent year is given: Total Company Office Chicago Minneapolis Sales $ 508,500 100.00% $ 169,500 100.00% $ 339,000 100.00% Variable expenses 254,250 50.00% 50,850 30.00% 203,400 60.00% Contribution margin 254,250 50.00% 118,650 70.00% 135,600 40.00% Traceable fixed expenses 142,380 28.00% 88,140 52.00% 54,240 16.00% Office segment margin 111,870 22.00% $ 30,510 18.00% $ 81,360 24.00% Common fixed expenses not traceable to offices 71,190 14.00% Net operating income $ 40,680 8.00% rev: 06_09_2020_QC_CS-215744, 09_15_2020_QC_CS-220558, 11_04_2020_QC_CS-238526, 03_30_2021_QC_CS-258090 Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4] Assume that Minneapolis’ sales by major market are: Minneapolis Market Medical Dental Sales $ 339,000 100.00% $ 226,000 100.00% $ 113,000 100.00% Variable expenses 203,400 60.00% 144,640 64.00% 58,760 52.00% Contribution margin 135,600 40.00% 81,360 36.00% 54,240 48.00% Traceable fixed expenses 37,290 11.00% 13,560 6.00% 23,730 21.00% Market segment margin 98,310 29.00% $ 67,800 30.00% $ 30,510 27.00% Common fixed expenses not traceable to markets 16,950 5.00% Office segment margin $ 81,360 24.00% The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,650. Marketing studies indicate that such a campaign would increase sales in the Medical market by $45,200 or increase sales in the Dental market by $39,550. Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one 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 company’s most recent year is given:
| Total Company | Office | |||||
|---|---|---|---|---|---|---|
| Chicago | Minneapolis | |||||
| Sales | $ 508,500 | 100.00% | $ 169,500 | 100.00% | $ 339,000 | 100.00% |
| Variable expenses | 254,250 | 50.00% | 50,850 | 30.00% | 203,400 | 60.00% |
| Contribution margin | 254,250 | 50.00% | 118,650 | 70.00% | 135,600 | 40.00% |
| Traceable fixed expenses | 142,380 | 28.00% | 88,140 | 52.00% | 54,240 | 16.00% |
| Office segment margin | 111,870 | 22.00% | $ 30,510 | 18.00% | $ 81,360 | 24.00% |
| Common fixed expenses not traceable to offices | 71,190 | 14.00% | ||||
| Net operating income | $ 40,680 | 8.00% |
rev: 06_09_2020_QC_CS-215744, 09_15_2020_QC_CS-220558, 11_04_2020_QC_CS-238526, 03_30_2021_QC_CS-258090
Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4]
Assume that Minneapolis’ sales by major market are:
| Minneapolis | Market | |||||
|---|---|---|---|---|---|---|
| Medical | Dental | |||||
| Sales | $ 339,000 | 100.00% | $ 226,000 | 100.00% | $ 113,000 | 100.00% |
| Variable expenses | 203,400 | 60.00% | 144,640 | 64.00% | 58,760 | 52.00% |
| Contribution margin | 135,600 | 40.00% | 81,360 | 36.00% | 54,240 | 48.00% |
| Traceable fixed expenses | 37,290 | 11.00% | 13,560 | 6.00% | 23,730 | 21.00% |
| Market segment margin | 98,310 | 29.00% | $ 67,800 | 30.00% | $ 30,510 | 27.00% |
| Common fixed expenses not traceable to markets | 16,950 | 5.00% | ||||
| Office segment margin | $ 81,360 | 24.00% |
The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,650. Marketing studies indicate that such a campaign would increase sales in the Medical market by $45,200 or increase sales in the Dental market by $39,550.
Required:
1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market?
2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market?
3. In which of the markets would you recommend that the company focus its advertising campaign?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education