Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices--one 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 company's most recent year is given: 500 Sales Variable expenses Contribution margin Traceable fixed expenses office segment margin Common fixed expenses not traceable to offices Net operating income Total Company $ 492,000 1000 246,000 246,000 508 137,760 289 108,240 22 68.880 140 $ 39,360 88 Office Chicago Minneapolis $ 171,000 100% $ 321,000 51,300 30 192,600 60 119,700 908 128, 400 40 88,920 52 51,360 16 $ 30,780188 $ 77,040 24 Exercise 7-17 (Algo) Working with a Segmented Income Statement (L07-4) Assume that Minneapolis' sales by major market are: Sales Variable expenses Contribution margin Traceable fixed expenses office segment margin Common fixed expennen not traceable to offices Net operating income 400 Market Medical Dental $ 220.000 1001 $ 120,000 1005 145,920 64 66.560 52 82,080 361 61, 440 480 13.680 68 26.090 210 $ 68.400 308 $34.560 Minneapolis $ 321,000 1000 192.600 600 128,400 51, 360 160 77,040 249 15,000 $ 62,040 19 27 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 $12,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $54,000 or increase sales in the Dental market by $56,000. Required: 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 $12,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $54,000 or increase sales in the Dental market by $56,000. 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? Company's profite Required 2 > Required: 1. How much would the company's profits increase (decrease) If it implemented the advertising campaign in the Medical 2. How much would the company's profits increase (decrease) If it implemented the advertising campaign in the Dental 3. In which of the markets would you recommend that the company focus its advertising campaign? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? Company's profits by 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical 2. How much would the company's profits increase (decrease) If it implemented the advertising campaign in the Dental - 3. In which of the markets would you recommend that the company focus its advertising campaign? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 In which of the markets would you recommend that the company focus its advertising campaign? O Medical Dental
