Required information

Skip to question

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

Raner, Harris and 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:

	Total Company	Office
Chicago	Minneapolis
Sales	$ 450,000	100%	$ 150,000	100%	$ 300,000	100%
Variable expenses	225,000	50%	45,000	30%	180,000	60%
Contribution margin	225,000	50%	105,000	70%	120,000	40%
Traceable fixed expenses	126,000	28%	78,000	52%	48,000	16%
Office segment margin	99,000	22%	$ 27,000	18%	$ 72,000	24%
Common fixed expenses not traceable to offices	63,000	14%
Net operating income	$ 36,000	8%

2. By how much would the companys net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns.