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:   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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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 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:

 

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?

2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $52,500 per year? Assume no change in cost behavior patterns.

3. Assume that sales in Chicago increase by $35,000 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs.

 

a. Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (i.e. 0.1234 should be entered as 12.3).)

 
Segments
Total Company
Chicago
Minneapolis
Amount
%
Amount
Amount
%
0.0
0.0
0.0
0.0
$
0.0
$
0.0
2$
0.0
Transcribed Image Text:Segments Total Company Chicago Minneapolis Amount % Amount Amount % 0.0 0.0 0.0 0.0 $ 0.0 $ 0.0 2$ 0.0
Required information
[The following information applies to the questions displayed below.]
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:
Office
Minneapolis
Total Company
$ 525,000
283,500
241, 500
117,600
Chicago
100.0%
54.0%
$ 420,000
$ 105,000
100%
Sales
Variable expenses
Contribution margin
Traceable fixed expenses
100%
60%
40%
15%
31,500
30%
252,000
168,000
63,000
46.0%
73,500
70%
22.4%
54,600
52%
office segment margin
123,900
23.6%
2$
18,900
18%
$ 105,000
25%
Common fixed expenses not traceable to offices
16.0%
84,000
2$
Net operating income
39,900
7.6%
Transcribed Image Text:Required information [The following information applies to the questions displayed below.] 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: Office Minneapolis Total Company $ 525,000 283,500 241, 500 117,600 Chicago 100.0% 54.0% $ 420,000 $ 105,000 100% Sales Variable expenses Contribution margin Traceable fixed expenses 100% 60% 40% 15% 31,500 30% 252,000 168,000 63,000 46.0% 73,500 70% 22.4% 54,600 52% office segment margin 123,900 23.6% 2$ 18,900 18% $ 105,000 25% Common fixed expenses not traceable to offices 16.0% 84,000 2$ Net operating income 39,900 7.6%
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