Marple Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices - one in Houston and one in Dallas. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the company's most recent year is given below: Total Company Houston Dallas 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% a) By how much would the company's net operating income increase if Dallas increased its sales by $75,000per year? Assume no change in cost behavior patterns. b) What is the net income increase? Refer to the original data. Assume that sales in Houston increase by 50,000 next year and that sales in Dallas remain unchanged. Assume no change in fixed costs. a)Prepare a new segmented income statement for the company. Show both amount and percentage
Marple Associates is a consulting firm that specializes in information systems for construction and landscaping companies.
The firm has two offices - one in Houston and one in Dallas.
The firm classifies the direct costs of consulting jobs as variable costs.
A segmented contribution format income statement for the company's most recent year is given below:
| Total Company | Houston | Dallas | ||||
|---|---|---|---|---|---|---|
| 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% |
a) By how much would the company's net operating income increase if Dallas increased its sales by $75,000per year?
Assume no change in cost behavior patterns.
b) What is the net income increase?
Refer to the original data.
Assume that sales in Houston increase by 50,000 next year and that sales in Dallas remain unchanged.
Assume no change in fixed costs.
a)Prepare a new segmented income statement for the company. Show both amount and percentage
b) observe from the income statement you have prepared that the CM ratio for manila has reamined unchanged at 70%( the same as in the data above ) but that segment margin ratio has changed. How do you explain the change in the segment margin ratio?
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