Required information

Raner, Harris and Chan is a consulting firm specializing in information systems for medical and dental clinics. The firm has two offices$$one in Chicago and one in Minneapolis. It classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company$$s most recent year is given below:

Total Company Office

Chicago Minneapolis

Sales $ $535,500100\mathrm{.}00\%$ $ $178,500100\mathrm{.}00\%$ $ $357,000100\mathrm{.}00\%$

Variable expenses $267,75050\mathrm{.}00\%53,55030\mathrm{.}00\%214,20060\mathrm{.}00\%$

Contribution margin $267,75050\mathrm{.}00\%124,95070\mathrm{.}00\%142,80040\mathrm{.}00\%$

Traceable fixed expenses $149,94028\mathrm{.}00\%92,82052\mathrm{.}00\%57,12016\mathrm{.}00\%$

Office segment margin $117,81022\mathrm{.}00\%$ $ $32,13018\mathrm{.}00\%$ $ $85,68024\mathrm{.}00\%$

Common fixed expenses not traceable to offices $74,97014\mathrm{.}00\%$

Net operating income $ $42,8408\mathrm{.}00\%$

Exercise $6-17($Algo$)$ Working with a Segmented Income Statement $[$LO$6-4]$

Assume Minneapolis$$s sales by major market are:

Minneapolis Market

Medical Dental

Sales $ $357,000100\mathrm{.}00\%$ $ $238,000100\mathrm{.}00\%$ $ $119,000100\mathrm{.}00\%$

Variable expenses $214,20060\mathrm{.}00\%152,32064\mathrm{.}00\%61,88052\mathrm{.}00\%$

Contribution margin $142,80040\mathrm{.}00\%85,68036\mathrm{.}00\%57,12048\mathrm{.}00\%$

Traceable fixed expenses $39,27011\mathrm{.}00\%14,2806\mathrm{.}00\%24,99021\mathrm{.}00\%$

Market segment margin $103,53029\mathrm{.}00\%$ $ $71,40030\mathrm{.}00\%$ $ $32,13027\mathrm{.}00\%$

Common fixed expenses not traceable to markets $17,8505\mathrm{.}00\%$

Office segment margin $ $85,68024\mathrm{.}00\%$

The company is planning a $$5,950$ advertising campaign next month in either the Medical or Dental market. Marketing studies indicate this campaign would increase Medical market sales by $$47,600$ or Dental market sales by $$41,650.$

Required:

How much would the company's profits increase $($decrease$)$ if it advertised in the Medical market?

How much would the company's profits increase $($decrease$)$ if it advertised in the Dental market?

Should the company advertise in the Medical or Dental market?