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 $ 468,000 100.00% $ 156,000 100.00% $ 312,000 100.00% Variable expenses 234,000 50.00% 46,800 30.00% 187,200 60.00% Contribution margin 234,000 50.00% 109,200 70.00% 124,800 40.00% Traceable fixed expenses 131,040 28.00% 81,120 52.00% 49,920 16.00% Office segment margin 102,960 22.00% $ 28,080 18.00% $ 74,880 24.00% Common fixed expenses not traceable to offices 65,520 14.00% Net operating income $ 37,440 8.00% Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4] Assume Minneapolis’s sales by major market are: Minneapolis Market Medical Dental Sales $ 312,000 100.00% $ 208,000 100.00% $ 104,000 100.00% Variable expenses 187,200 60.00% 133,120 64.00% 54,080 52.00% Contribution margin 124,800 40.00% 74,880 36.00% 49,920 48.00% Traceable fixed expenses 34,320 11.00% 12,480 6.00% 21,840 21.00% Market segment margin 90,480 29.00% $ 62,400 30.00% $ 28,080 27.00% Common fixed expenses not traceable to markets 15,600 5.00% Office segment margin $ 74,880 24.00% The company is planning a $5,200 advertising campaign next month in either the Medical or Dental market. Marketing studies indicate this campaign would increase Medical market sales by $41,600 or Dental market sales by $36,400. Required: How much would the company's profits increase (decrease) if it advertised in the Medical market? icreased by how much How much would the company's profits increase (decrease) if it advertised in the Dental market? increased by how much

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

	Total Company	Office
Chicago	Minneapolis
Sales	$ 468,000	100.00%	$ 156,000	100.00%	$ 312,000	100.00%
Variable expenses	234,000	50.00%	46,800	30.00%	187,200	60.00%
Contribution margin	234,000	50.00%	109,200	70.00%	124,800	40.00%
Traceable fixed expenses	131,040	28.00%	81,120	52.00%	49,920	16.00%
Office segment margin	102,960	22.00%	$ 28,080	18.00%	$ 74,880	24.00%
Common fixed expenses not traceable to offices	65,520	14.00%
Net operating income	$ 37,440	8.00%

Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4]

Assume Minneapolis’s sales by major market are:

	Minneapolis	Market
Medical	Dental
Sales	$ 312,000	100.00%	$ 208,000	100.00%	$ 104,000	100.00%
Variable expenses	187,200	60.00%	133,120	64.00%	54,080	52.00%
Contribution margin	124,800	40.00%	74,880	36.00%	49,920	48.00%
Traceable fixed expenses	34,320	11.00%	12,480	6.00%	21,840	21.00%
Market segment margin	90,480	29.00%	$ 62,400	30.00%	$ 28,080	27.00%
Common fixed expenses not traceable to markets	15,600	5.00%
Office segment margin	$ 74,880	24.00%

The company is planning a $5,200 advertising campaign next month in either the Medical or Dental market. Marketing studies indicate this campaign would increase Medical market sales by $41,600 or Dental market sales by $36,400.

Required:

How much would the company's profits increase (decrease) if it advertised in the Medical market? icreased by how much
How much would the company's profits increase (decrease) if it advertised in the Dental market? increased by how much

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