CH 7 22-25

1-a. Compute the companywide break-even point in dollar sales.

1-b. Compute the break-even point for the Chicago office and for the Minneapolis office.

1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?

2. By how much would the companys net operating income increase if Minneapolis increased its sales by $93,750 per year? Assume no change in cost behavior patterns.

3. Assume that sales in Chicago increase by $62,500 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs.

a. Prepare a new segmented income statement for the company.

Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one 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 company's most recent year is given: Office Chicago 56,250 97,500 Total Company Minneapolis Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income $937,500 100.0% $187,500 100% $750,000 100% 506,250 54.0% 431,250 46.0% 210,000 22.4% 221,250 23.6% $ 33,750 18% $187,500 25% 150,000 450,000 300,000 112,500 30% 60% 131,250 7 52% 15% 16.0% 71,250 7.6% Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one 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 company's most recent year is given: Office Chicago 56,250 97,500 Total Company Minneapolis Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income $937,500 100.0% $187,500 100% $750,000 100% 506,250 54.0% 431,250 46.0% 210,000 22.4% 221,250 23.6% $ 33,750 18% $187,500 25% 150,000 450,000 300,000 112,500 30% 60% 131,250 7 52% 15% 16.0% 71,250 7.6%