Working with a Segmented Income Statement [LO4]

Refer to the data in Exercise 6–14. Assume that Dallas’ sales by major market are as follows:

The company would like to initiate an intensive advertising campaign in one of the two markets during the next month. The campaign would cost $8,000. Marketing studies indicate that such a campaign would increase sales in the construction market by $70,000 or increase sales in the landscaping market by $60,000.
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 6–14 , Dallas shows $90,000 in traceable fixed expenses. What happened to the $90,000 i n t his e xercise?

Transcribed Image Text:

Market Construction Dallas Clients Landscaping Clients Sales... Variable expenses 360,000 $600,000 100% 60 $400,000 100% $200,000 100% 260,000 65 100,000 50 Contribution margin 240,000 140,000 35 100,000 50 Traceable fixed expenses Market segment margin. Common fixed expenses not traceable to markets... Office segment margin....... 72,000 168,000 18,000 $150,000 25% 20,000 $120,000 30% $ 48,000 5 52,000 26 24%