Exercise 7-4 Basic Segmented Income Statement (L07-4) Royal Lawncare Company produces and sells two packaged products-Weedban and Greengrow. Revenue and cost information relating to the products follow: Selling price per unit Variable expenses per unit Traceable fixed expenses per year Product Weedban Greengrow $ 8.00 $ 37.00 $ 2.70 $12.00 $ 138,000 $ 37,000 Common fixed expenses in the company total $108,000 annually. Last year the company produced and sold 36,000 units of Weedban and 21000 units of Greengrow. Required: Prepare a contribution format Income statement segmented by product lines. Product Line Total Company Weedban Greengrow 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: Assume that Minneapolis' sales by major market are: Sales Variable expenses Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets Office segment margin Market Minneapolis Medical Dental $900,000 1001 $600,000 1001 $300,000 100% 540,000 604 390,000 654 150,000 ses 360,000 404 210,000 354 150,000 505 108,000 124 30,000 5 78,000 264 252,000 284 $180,000 304 $ 72,000 245 27,000 $225,000 34 254 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 $12,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $105,000 or increase sales in the Dental market by $90,000 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? Complete this question by entering your answers in the tabs below. Required: Required 2 Required 3 How much would the company's profits increase (decrease) if it implemented the advertising campaig in the Medical Market? Company's profits by Market Minneapolis Medical Dental $900,000 1099 $600,000 100% $300,000 100% 540,000 609 390,000 65% 150,000 504 360,000 210,000 354 150,000 50% 108,000 12 30,000 59 78,000 264 252,000 28% $180,000 304 $ 72,000 24% Sales Variable expenses Contribution margin Traceable fixed expenses Market segnent margin Common fixed expenses not traceable to markets Office segment margin 40% 27,000 $225,000 38 25 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 $12,000 Marketing studies indicate that such a campaign would increase sales in the Medical market by $105,000 or increase sales in the Dental market by $90,000. 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? Company's profits by Sales Variable expenses Contribution margin Traceable fixed expenses Market segment nargin Common fixed expenses not traceable to markets Office segment margin Market Minneapolis Medical Dental $900,000 1899 $600,000 100% $300,000 1999 540,000 60% 390,000 654 150,000 504 360,000 40% 210,000 354 150,000 509 108,000 12% 30,000 54 78,000 264 252,000 284 $180,000 30% $ 72,000 24 27,000 $225,000 34 254 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 $12,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $105,000 or increase sales in the Dental market by $90,000. 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Reafired 3 in which of the markets would you recommend that the company focus its advertising campaign? Medical Dental