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Required: 1. By how much would the company's operating income increase if Vancouver increased its sales by $89,000 per year? Assume no change in cost behaviour patterns.

Required: 1. By how much would the company's operating income increase if Vancouver increased its sales by $89,000 per year? Assume no change in cost behaviour patterns.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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D1.

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Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices-one in Toronto and one in Vancouver. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the company's most recent year is given below: Sales Variable expenses. Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Operating income Increase in operating income Office 120,000 12.50 $139,200 14.50% Toronto Total Company $960,000 100.0% $160,000 100% 528,000 55.00 432,000 45.00 172,800 18.00 48,000 30 259,200 27.00 Vancouver $800,000 100% 480,000 60 320,000 40 80,000 10 $ 19,200 12% $240,000 30% 112,000 70 92,800 58 Required: 1. By how much would the company's operating income increase if Vancouver increased its sales by $89,000 per year? Assume no change in cost behaviour patterns.
Transcribed Image Text:Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices-one in Toronto and one in Vancouver. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the company's most recent year is given below: Sales Variable expenses. Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Operating income Increase in operating income Office 120,000 12.50 $139,200 14.50% Toronto Total Company $960,000 100.0% $160,000 100% 528,000 55.00 432,000 45.00 172,800 18.00 48,000 30 259,200 27.00 Vancouver $800,000 100% 480,000 60 320,000 40 80,000 10 $ 19,200 12% $240,000 30% 112,000 70 92,800 58 Required: 1. By how much would the company's operating income increase if Vancouver increased its sales by $89,000 per year? Assume no change in cost behaviour patterns.
2-a. Refer to the original data. Assume that sales in Toronto increase by $40,000 next year and that sales in Vancouver remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage answers to 2 decimal places.) Total Company Amount $ $ $ 0 0 0 % 0.00 0.00 $ 0.00 Toronto Amount 0 0 Segments % 0.00 0.00 Vancouver Amount $ 0 0 % 0.00 0.00
Transcribed Image Text:2-a. Refer to the original data. Assume that sales in Toronto increase by $40,000 next year and that sales in Vancouver remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage answers to 2 decimal places.) Total Company Amount $ $ $ 0 0 0 % 0.00 0.00 $ 0.00 Toronto Amount 0 0 Segments % 0.00 0.00 Vancouver Amount $ 0 0 % 0.00 0.00
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