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Exercise 7-16 Working with a Segmented Income Statement; Break-Even Analysis (L07-4, L07-5) [The following information applies to the questions displayed below.) Raner, Harris & Chan

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Exercise 7-16 Working with a Segmented Income Statement; Break-Even Analysis (L07-4, L07-5) [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 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: Sales Variable expenses Contribution margin Traceable fixed expenses office segment margin Common fixed expenses not traceable to offices Net operating income Total Company $ 750,000 100.00 405,000 54.00 345,000 46.00 168,000 22.48 177,000 23.60 120.000 16.00 $ 57,000 7.68 office Chicago Minneapolis $ 150,000 1008 $ 600,000 1008 45,000 301 360,000 608 105,000 700 240,000 408 78,000 520 90,000 $ 27,000 188 $ 150,000 258 158 Exercise 7-16 Part 1 Required: 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 company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns Nut operating income increase 3. Assume that sales in Chicago increase by $50,000 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. (Round your percentage answers to 1 decimal place (.e. 0.1234 should be entered as 12.3).) Total Company Amount % Chicago Amount Segments Minneapolis Amount % %

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