Exercise 11-3 Working with a Segmented Income Statement [LO1]

Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two officesone in Toronto and one in Vancouver. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the companys most recent year is given below:

Required: 1. By how much would the companys operating income increase if Vancouver increased its sales by $93,000 per year? Assume no change in cost behaviour patterns.

2-a. Refer to the original data. Assume that sales in Toronto increase by $50,000 next year and that sales in Vancouver remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage answers to 2 decimal places.)

Total Company $ 750,000 100.00% 330,000 44.00 Sales Variable expenses Office Vancouver 100% $ 600,000 100% 20 300,000 50 Toronto $ 150,000 30,000 80 Contribution margin Traceable fixed expenses 420,000 144,000 56.00 19.20 50 120,000 54,000 300,000 90,000 15 Office segment margin 276,000 36.80 $ 66,000 44% $ 210,000 357 Common fixed expenses not traceable to offices 60,000 8.00 Operating income $ 216,000 28.80% Increase in operating income Total Company Amount % Toronto Amount Segments Vancouver % Amount %