Simon Hinson Company operates two divisions: Gordon and Ronin. A segmented profit and

loss statement for the company's most recent year is as follows:

Total company Gordon division Ronin division

Sales $850 000 $250 000 $600 000

Less variable expenses 505 000 145 000 360 000

Contribution margin $345 000 $105 000 $240 000

Less traceable fixed costs 145 000 45 000 100 000

Division segment margin $200 000 $ 60 000 $140 000

Less common fixed costs 130 000

Net profit $ 70 000

Required

a

If the Gordon Division increased its sales by $85000 per year, how much would the

company's net profit change? Assume that all cost behaviour patterns remained constant.

b

Assume that the Ronin Division increased sales by $100000, the Gordon Division sales

remained the same, and there was no change in fixed costs.

i

Calculate the net profit amounts for each division and the total company.

ii Calculate the segment margin ratios before and after these changes and

comment on the results. Explain the changes.

c

How do the sales increases and decreases impact divisional contribution margin ratio and

segment margin ratio?