Homework Problem #2 - The business staff of the law firm Frampton, David & Smythe has constructed the following report that breaks down the firm's overall results for last month into two business segments - family law and commercial law: Revenues from clients Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income (loss) Company Total $ 1,000,000 220,000 780,000 670,000 110,000 60,000 $ 50,000 Family Law Commercial Law $ 400,000 $ 600,000 100,000 120,000 300,000 480,000 280,000 390,000 20,000 90,000 24,000 36,000 $ (4,000 $ 54,000 However, this report is not quite correct. The common fixed expenses such as the managing partner's salary, general administrative expenses, and general firm advertising have been allocated to the two segments based on revenues from clients. Required: 1. Redo the segment report, eliminating the allocation of common fixed expenses. Would the firm be better off financially if the family law segment were dropped? (Note: Many of the firm's commercial law clients also use the firm for their family law needs such as drawing up wills.) 2. The firm's advertising agency has proposed an ad campaign targeted at boosting the revenues of the family law segment. The ad campaign would cost $20,000, and the advertising agency claims it would increase family law revenues by $100,000. The managing partner of Frampton, David & Smythe believes this increase in business could be accommodated without any increase in fixed expenses. Estimate the effect this ad campaign would have on the family law segment margin and on the firm's overall net operating income