Question
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. A contribution format segmented income statement for the companys most recent year is given:
| Office | |||||||||||||||||
| Total Company | Chicago | Minneapolis | |||||||||||||||
| Sales | $ | 513,000 | 100.00 | % | $ | 171,000 | 100.00 | % | $ | 342,000 | 100.00 | % | |||||
| Variable expenses | 256,500 | 50.00 | % | 51,300 | 30.00 | % | 205,200 | 60.00 | % | ||||||||
| Contribution margin | 256,500 | 50.00 | % | 119,700 | 70.00 | % | 136,800 | 40.00 | % | ||||||||
| Traceable fixed expenses | 143,640 | 28.00 | % | 88,920 | 52.00 | % | 54,720 | 16.00 | % | ||||||||
| Office segment margin | 112,860 | 22.00 | % | $ | 30,780 | 18.00 | % | $ | 82,080 | 24.00 | % | ||||||
| Common fixed expenses not traceable to offices | 71,820 | 14.00 | % | ||||||||||||||
| Net operating income | $ | 41,040 | 8.00 | % | |||||||||||||
rev: 06_09_2020_QC_CS-215744, 09_15_2020_QC_CS-220558, 11_04_2020_QC_CS-238526, 03_30_2021_QC_CS-258090
Exercise 6-16 Part 2 (Algo) Working with a Segmented Income Statement; Break-Even Analysis [LO6-4, LO6-5]
2. By how much would the companys net operating income increase if Minneapolis increased its sales by $85,500 per year? Assume no change in cost behavior patterns.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started