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Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago
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. Assume that Minneapolis' sales by major market are: Market Sales S $ S Variable expenses Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets Office segment margin Minneapolis 300.000 100 % 180.000 80 % 120.000 40 % 33.000 11 96 87.000 29 % Medical 200.000 128.000 72.000 12.000 60.000 100 % 64 96 36 96 6 % 30 % Dental 100.000 52.000 48.000 21,000 27.000 100 % 52 % 48 96 21 96 27 % S s 15.000 72.000 5 % 24 % S 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 $5,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $40,000 or increase sales in the Dental market by $35,000 Required: 1-a. Calculate the increase in the segment margin. Medical Dental Increase in the segment margin 1-b. In which of the markets would you recommend that the company's Minneapolis office focus its advertising campaign? O Medical Dental
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