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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 $ 1,000,000 100.00 % $ 300,000 100 % $ 700,000 100 %
Variable expenses 490,000 49.00 105,000 35 385,000 55
Contribution margin 510,000 51.00 195,000 65 315,000 45
Traceable fixed expenses 280,000 28.00 168,000 56 112,000 16
Office segment margin 230,000 23.00 $ 27,000 9 % $ 203,000 29 %
Common fixed expenses not traceable to offices 84,000 8.40
Operating income $ 146,000 14.60 %

Required: 1. By how much would the companys operating income increase if Vancouver increased its sales by $80,000 per year? Assume no change in cost behaviour patterns.

2-a. Refer to the original data. Assume that sales in Toronto increase by $120,000 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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