Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the companys most recent year is given:

Office Total Company Chicago Minneapolis Sales $ 474,000 100 % $ 162,000 100 % $ 312,000 100 % Variable expenses 235,800 50 % 48,600 30 % 187,200 60 % Contribution margin 238,200 50 % 113,400 70 % 124,800 40 % Traceable fixed expenses 134,160 28 % 84,240 52 % 49,920 16 % Office segment margin 104,040 22 % $ 29,160 18 % $ 74,880 24 % Common fixed expenses not traceable to offices 66,360 14 % Net operating income $ 37,680 8 %

Assume that Minneapolis sales by major market are: Market Minneapolis Medical Dental Sales $ 312,000 100 % $ 224,000 100 % $ 124,000 100 % Variable expenses 187,200 60 % 143,360 64 % 64,480 52 % Contribution margin 124,800 40 % 90,000 36 % 59,520 48 % Traceable fixed expenses 34,320 11 % 13,440 6 % 26,040 21 % Market segment margin 90,480 29 % $ 67,200 30 % $ 33,480 27 % Common fixed expenses not traceable to markets 15,600 5 % Office segment margin $ 74,880 24 %

The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $11,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $52,000 or increase sales in the Dental market by $53,000.

Required:

1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market?

2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market?

3. In which of the markets would you recommend that the company focus its advertising campaign?