Required information

Exercise 6-16 Working with a Segmented Income Statement; Break-Even Analysis [LO6-4, LO6-5]

[The following information applies to the questions displayed below.]

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	$	600,000		100.0	%		$	120,000		100	%		$	480,000		100	%
Variable expenses		324,000		54.0	%			36,000		30	%			288,000		60	%
Contribution margin		276,000		46.0	%			84,000		70	%			192,000		40	%
Traceable fixed expenses		134,400		22.4	%			62,400		52	%			72,000		15	%
Office segment margin		141,600		23.6	%		$	21,600		18	%		$	120,000		25	%
Common fixed expenses not traceable to offices		96,000		16.0	%
Net operating income	$	45,600		7.6	%

Exercise 6-16 Part 2

2. By how much would the companys net operating income increase if Minneapolis increased its sales by $60,000 per year? Assume no change in cost behavior patterns.