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: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Total Company $ 501,000 100% 250,500 50% 250, 500 508 140,280 288 110,220 22% 70,140 14% $ 40,080 Office Chicago Minneapolis $ 175,500 100% $ 325,500 100% 52,650 30% 195,300 608 122,850 708 130,200 408 91,260 52% 52,080 168 $ 31,590 18% $ 78, 120 248 Assume that Minneapolis' sales by major market are: Sales Variable expenses ribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Minneapolis $ 325,500 100% 195,300 60% 130,200 40% 52,080 16% 78,120 248 15,000 5 % $ 63,120 19 % Market Medical Dental $ 234,000 100% $ 134,000 100% 149,760 648 69,680 52% 84,240 36% 64,320 48% 14,040 6% 28,140 21% $ 70,200 30$ $ 36,180 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 $13,500. Marketing studies indicate that such a campaign would increase sales in the Medical market by $57,000 or increase sales in the Dental market by $60,500. 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 profits by 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 Dental Market? Company's profits by 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 In which of the markets would you recommend that the company focus its advertising campaign? O Medical Dental
