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Exercise 7-16 Working with a Segmented Income Statement; Break-Even Analysis [LO7-4, LO7-5]

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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 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	$	750,000		100.0	%		$	150,000		100	%		$	600,000		100	%
Variable expenses		405,000		54.0	%			45,000		30	%			360,000		60	%
Contribution margin		345,000		46.0	%			105,000		70	%			240,000		40	%
Traceable fixed expenses		168,000		22.4	%			78,000		52	%			90,000		15	%
Office segment margin		177,000		23.6	%		$	27,000		18	%		$	150,000		25	%
Common fixed expenses not traceable to offices		120,000		16.0	%
Net operating income	$	57,000		7.6	%

Exercise 7-16 Part 2

2. Assume that sales in Chicago increase by $50,000 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs.

a. Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (i.e. 0.1234 should be entered as 12.3).)