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
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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:

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