Raner, Harris and 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 $ 450,000 100% $ 150,000 100% $ 300,000 100% Variable expenses 225,000 50% 45,000 30% 180,000 60% Contribution margin 225,000 50% 105,000 70% 120,000 40% Traceable fixed expenses 126,000 28% 78,000 52% 48,000 16% Office segment margin 99,000 22% $ 27,000 18% $ 72,000 24% Common fixed expenses not traceable to offices 63,000 14% Net operating income $ 36,000 8% 2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns.
Raner, Harris and 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 $ 450,000 100% $ 150,000 100% $ 300,000 100% Variable expenses 225,000 50% 45,000 30% 180,000 60% Contribution margin 225,000 50% 105,000 70% 120,000 40% Traceable fixed expenses 126,000 28% 78,000 52% 48,000 16% Office segment margin 99,000 22% $ 27,000 18% $ 72,000 24% Common fixed expenses not traceable to offices 63,000 14% Net operating income $ 36,000 8% 2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Raner, Harris and 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 | $ 450,000 | 100% | $ 150,000 | 100% | $ 300,000 | 100% |
| Variable expenses | 225,000 | 50% | 45,000 | 30% | 180,000 | 60% |
| Contribution margin | 225,000 | 50% | 105,000 | 70% | 120,000 | 40% |
| Traceable fixed expenses | 126,000 | 28% | 78,000 | 52% | 48,000 | 16% |
| Office segment margin | 99,000 | 22% | $ 27,000 | 18% | $ 72,000 | 24% |
| Common fixed expenses not traceable to offices | 63,000 | 14% | ||||
| Net operating income | $ 36,000 | 8% |
2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns.
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