1 Required information SB Exercise 6 16 through Exercise 6 17 (Algo) The following information applies to the questions displayed below Raner, Harris Chan is a consulting firm that specializes in information systems for medical and dental clinics The firm has two officesone in Chicago and one in Minneapolis The firm classifies the direct costs of consulting jobs as variable costs A contribution format segmented income statement for the companys most recent year is given Total Company Office Chicago Minneapolis Sales $ 526,500 100 00 $ 175,500 100 00 $ 351,000 100 00 Variable expenses 263,250 50 00 52,650 30 00 210,600 60 00 Contribution margin 263,250 50 00 122,850 70 00 140,400 40 00 Traceable fixed expenses 147,420 28 00 91,260 52 00 56,160 16 00 Office segment margin 115,830 22 00 $ 31,590 18 00 $ 84,240 24 00 Common fixed expenses not traceable to offices 73,710 14 00 Net operating income $ 42,120 8 00 Exercise 6 17 (Algo) Working with a Segmented Income Statement LO6 4 Assume that Minneapolis sales by major market are Minneapolis Market Medical Dental Sales $ 351,000 100 00 $ 234,000 100 00 $ 117,000 100 00 Variable expenses 210,600 60 00 149,760 64 00 60,840 52 00 Contribution margin 140,400 40 00 84,240 36 00 56,160 48 00 Traceable fixed expenses 38,610 11 00 14,040 6 00 24,570 21 00 Market segment margin 101,790 29 00 $ 70,200 30 00 $ 31,590 27 00 Common fixed expenses not traceable to markets 17,550 5 00 Office segment margin $ 84,240 24 00 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 $5,850 Marketing studies indicate that such a campaign would increase sales in the Medical market by $46,800 or increase sales in the Dental market by $40,950 Required 1 How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market 2 How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market 3 In which of the markets would you recommend that the company focus its advertising campaign

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1. Required information SB Exercise 6-16 through Exercise 6-17 (Algo) [The following information applies to the questions displayed below.] Raner, Harris & Chan is a

1. Required information

SB Exercise 6-16 through Exercise 6-17 (Algo)

[The following information applies to the questions displayed below.]

Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the companys most recent year is given:

	Total Company		Office
	Total Company		Chicago		Minneapolis
Sales	$ 526,500	100.00%	$ 175,500	100.00%	$ 351,000	100.00%
Variable expenses	263,250	50.00%	52,650	30.00%	210,600	60.00%
Contribution margin	263,250	50.00%	122,850	70.00%	140,400	40.00%
Traceable fixed expenses	147,420	28.00%	91,260	52.00%	56,160	16.00%
Office segment margin	115,830	22.00%	$ 31,590	18.00%	$ 84,240	24.00%
Common fixed expenses not traceable to offices	73,710	14.00%
Net operating income	$ 42,120	8.00%

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

Assume that Minneapolis sales by major market are:

	Minneapolis		Market
	Minneapolis		Medical		Dental
Sales	$ 351,000	100.00%	$ 234,000	100.00%	$ 117,000	100.00%
Variable expenses	210,600	60.00%	149,760	64.00%	60,840	52.00%
Contribution margin	140,400	40.00%	84,240	36.00%	56,160	48.00%
Traceable fixed expenses	38,610	11.00%	14,040	6.00%	24,570	21.00%
Market segment margin	101,790	29.00%	$ 70,200	30.00%	$ 31,590	27.00%
Common fixed expenses not traceable to markets	17,550	5.00%
Office segment margin	$ 84,240	24.00%

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 $5,850. Marketing studies indicate that such a campaign would increase sales in the Medical market by $46,800 or increase sales in the Dental market by $40,950.

Required:

1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market?

2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market?

3. In which of the markets would you recommend that the company focus its advertising campaign?