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Raner, Harris and Chan is a consulting firm specializing in information systems for medical and dental clinics. The firm has two officesone in Chicago and
Raner, Harris and Chan is a consulting firm specializing in information systems for medical and dental clinics. The firm has two officesone in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the companys most recent year is given below:
| Total Company | Office | |||||
|---|---|---|---|---|---|---|
| Chicago | Minneapolis | |||||
| Sales | $ 468,000 | 100.00% | $ 156,000 | 100.00% | $ 312,000 | 100.00% |
| Variable expenses | 234,000 | 50.00% | 46,800 | 30.00% | 187,200 | 60.00% |
| Contribution margin | 234,000 | 50.00% | 109,200 | 70.00% | 124,800 | 40.00% |
| Traceable fixed expenses | 131,040 | 28.00% | 81,120 | 52.00% | 49,920 | 16.00% |
| Office segment margin | 102,960 | 22.00% | $ 28,080 | 18.00% | $ 74,880 | 24.00% |
| Common fixed expenses not traceable to offices | 65,520 | 14.00% | ||||
| Net operating income | $ 37,440 | 8.00% |
2. How much would the companys net operating income increase if Minneapolis increased its sales by $78,000 per year? Assume no change in cost behavior patterns.
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