Question
Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two officesone in Toronto and one
Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two officesone 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 companys most recent year is given below: Office Total Company Toronto Vancouver Sales $ 1,100,000 100.0 % $ 330,000 100 % $ 770,000 100 % Variable expenses 616,000 56.00 115,500 35 500,500 65 Contribution margin 484,000 44.00 214,500 65 269,500 35 Traceable fixed expenses 308,000 28.00 184,800 56 123,200 16 Office segment margin 176,000 16.00 $ 29,700 9 % $ 146,300 19 % Common fixed expenses not traceable to offices 110,000 10.00 Operating income $ 66,000 6.00 % Required: 1. How much would the companys operating income increase if Vancouver increased its sales by $86,000 per year? Assume no change in cost behaviour patterns. 2-a. Refer to the original data. Assume that sales in Toronto will increase by $150,000 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.)
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