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Raner, Harris and 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:

Total Company Office

Chicago Minneapolis

Sales $ $450,000100\%$ $ $150,000100\%$ $ $300,000100\%$

Variable expenses $225,00050\%45,00030\%180,00060\%$

Contribution margin $225,00050\%105,00070\%120,00040\%$

Traceable fixed expenses $126,00028\%78,00052\%48,00016\%$

Office segment margin $99,00022\%$ $ $27,00018\%$ $ $72,00024\%$

Common fixed expenses not traceable to offices $63,00014\%$

Net operating income $ $36,0008\%$

Assume that Minneapolis$$ sales by major market are:

Minneapolis Market

Medical Dental

Sales $ $300,000100\%$ $ $200,000100\%$ $ $100,000100\%$

Variable expenses $180,00060\%128,00064\%52,00052\%$

Contribution margin $120,00040\%72,00036\%48,00048\%$

Traceable fixed expenses $33,00011\%12,0006\%21,00021\%$

Market segment margin $87,00029\%$ $ $60,00030\%$ $ $27,00027\%$

Common fixed expenses not traceable to markets $15,0005\%$

Office segment margin $ $72,00024\%$

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 $$5,000.$ Marketing studies indicate that such a campaign would increase sales in the Medical market by $$40,000$ or increase sales in the Dental market by $$35,000.$

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?