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Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices-one in Toronto and one

Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices-one 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 company's most recent year is given below: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Operating income Total Company Toronto Office Vancouver $750,000 100.0% $120,000 100% $630,000 100% 414,000 55.20 36,000 30 378,000 60 336,000 44.80 84,000 70 252,000 40 147,000 19.60 58,800 49 88,200 14 189,000 25.20 $ 25,200 21% $163,800 26% 147,000 19.60 $ 42,000 5.60% Required: 1. By how much would the company's operating income increase if Vancouver increased its sales by $72,000 per year? Assume no change in cost behaviour patterns. Increase in operating income $ 28,800 2-a. Refer to the original data. Assume that sales in Toronto increase by $90,000 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.) 2-a. Refer to the original data. Assume that sales in Toronto increase by $90,000 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.) Segments Total Company Toronto Vancouver Amount % Amount % Amount % Sales Variable expenses Contribution margin $ 840,000 100.00 $ 210,000 100.00 100.00 60.00 $ 840,000 100.00 Traceable fixed expenses 147,000 210,000 100.00 58,800 0 40.00 88,200 Office segment margin $ 693,000 100.00 $ 151,200 100.00 $ (88,200) 40.00 Common fixed expenses not traceable to segments 147,000 Operating income $ 546,000 100.00

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