6-16

Chapter 6 EXERCISE 6-16 Working with a Segmented income Statement, Break-Even Analysis [L.06-4, L06-5] Raner. Harris, \& Chan is a consulting firm that specializes in informatioa systems for medical and dental clinics. The firm has fwo offices - one in Chicago and one in Minneopolis. The firm 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: Required: 1. Compute the companywide break-even point in dollar sales. Also, compufe the break-even point for the Chicago office and for the Minneapolis office. Is the companywide breakeven point greater than, less than, or equal to the sum of the Chicago and Minneapolis: break evea points? Why? 2. By how much would the company's net operating income increase if Minneapolis incrased its sales by $75,000 per year A ssume no change in cout he havior patterns. 3. Reler to the original data. Assume that sales in Chicago increase by $50,000 next year and that sales in Minseapolis remain unchainged. Assume no change in fixed costs. a. Prepare a new segmented iacome statemene for the company using the above formate. Show both amounts and peroentiges. b. Observe from the income statement you have prepared that the cositribution margin ratio far Chicago has remained unchanged at 70% (the same as in the above data) bat that the Aegment margin ratio has changed. How do you explain the change in the segrient mar