Refer to the data in Exercise 12-13. Assume that Minneapolis’ sales by major market are:

The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $40,000 or increase sales in the Dental market by $35,000.

Required:

1.         In which of the markets would you recommend that the company focus its advertising campaign? Show computations to support your answer.

2.         In Exercise 12—13, Minneapolis shows $48,000 in traceable fixed expenses. What happened to the $48,000 in this exercise?

Office Total Company Minneapolis Chicago Sales $300,000 100% $200,000 100% $100,000 100% Variable expenses 180,000 60% 128,000 64% 52,000 52% Contribution margin 40% 72,000 120,000 36% 48,000 48% Traceable fixed expenses 11% 6% 21,000 21% 33,000 12,000 Office segment margin 29% $ 60,000 30% $ 27,000 27% 87,000 Common fixed expenses not traceable to office 15,000 5% Office segment margin S 72,000 24%