Question
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
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 $1,100,000 100.0% $330,000 100% $770,000 100% 616,000 56.00 115,500 35 500,500 65 484,000 44.00 214,500 65 269,500 35 308,000 28.00 184,800 56 123,200 16 176,000 16.00 $ 29,700 9% $146,300 198 110,000 10.00 $ 66,000 6.00% Required: 1. By how much would the company's operating income increase if Vancouver increased its sales by $86,000 per year? Assume no change in cost behaviour patterns. Increase in operating income
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