Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one 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 company’s most recent year is given: Total Company Office Chicago Minneapolis Sales $ 508,500 100.00% $ 169,500 100.00% $ 339,000 100.00% Variable expenses 254,250 50.00% 50,850 30.00% 203,400 60.00% Contribution margin 254,250 50.00% 118,650 70.00% 135,600 40.00% Traceable fixed expenses 142,380 28.00% 88,140 52.00% 54,240 16.00% Office segment margin 111,870 22.00% $ 30,510 18.00% $ 81,360 24.00% Common fixed expenses not traceable to offices 71,190 14.00% Net operating income $ 40,680 8.00% rev: 06_09_2020_QC_CS-215744, 09_15_2020_QC_CS-220558, 11_04_2020_QC_CS-238526, 03_30_2021_QC_CS-258090 Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4] Assume that Minneapolis’ sales by major market are: Minneapolis Market Medical Dental Sales $ 339,000 100.00% $ 226,000 100.00% $ 113,000 100.00% Variable expenses 203,400 60.00% 144,640 64.00% 58,760 52.00% Contribution margin 135,600 40.00% 81,360 36.00% 54,240 48.00% Traceable fixed expenses 37,290 11.00% 13,560 6.00% 23,730 21.00% Market segment margin 98,310 29.00% $ 67,800 30.00% $ 30,510 27.00% Common fixed expenses not traceable to markets 16,950 5.00% Office segment margin $ 81,360 24.00% The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,650. Marketing studies indicate that such a campaign would increase sales in the Medical market by $45,200 or increase sales in the Dental market by $39,550. Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?

Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one 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 company’s most recent year is given: Total Company Office Chicago Minneapolis Sales $ 508,500 100.00% $ 169,500 100.00% $ 339,000 100.00% Variable expenses 254,250 50.00% 50,850 30.00% 203,400 60.00% Contribution margin 254,250 50.00% 118,650 70.00% 135,600 40.00% Traceable fixed expenses 142,380 28.00% 88,140 52.00% 54,240 16.00% Office segment margin 111,870 22.00% $ 30,510 18.00% $ 81,360 24.00% Common fixed expenses not traceable to offices 71,190 14.00% Net operating income $ 40,680 8.00% rev: 06_09_2020_QC_CS-215744, 09_15_2020_QC_CS-220558, 11_04_2020_QC_CS-238526, 03_30_2021_QC_CS-258090 Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4] Assume that Minneapolis’ sales by major market are: Minneapolis Market Medical Dental Sales $ 339,000 100.00% $ 226,000 100.00% $ 113,000 100.00% Variable expenses 203,400 60.00% 144,640 64.00% 58,760 52.00% Contribution margin 135,600 40.00% 81,360 36.00% 54,240 48.00% Traceable fixed expenses 37,290 11.00% 13,560 6.00% 23,730 21.00% Market segment margin 98,310 29.00% $ 67,800 30.00% $ 30,510 27.00% Common fixed expenses not traceable to markets 16,950 5.00% Office segment margin $ 81,360 24.00% The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,650. Marketing studies indicate that such a campaign would increase sales in the Medical market by $45,200 or increase sales in the Dental market by $39,550. Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 6E: Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing...

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	Total Company	Office
Chicago	Minneapolis
Sales	$ 508,500	100.00%	$ 169,500	100.00%	$ 339,000	100.00%
Variable expenses	254,250	50.00%	50,850	30.00%	203,400	60.00%
Contribution margin	254,250	50.00%	118,650	70.00%	135,600	40.00%
Traceable fixed expenses	142,380	28.00%	88,140	52.00%	54,240	16.00%
Office segment margin	111,870	22.00%	$ 30,510	18.00%	$ 81,360	24.00%
Common fixed expenses not traceable to offices	71,190	14.00%
Net operating income	$ 40,680	8.00%

Exercise 6-17 (Algo) Working with a Segmented Income Statement [LO6-4]

Assume that Minneapolis’ sales by major market are:

	Minneapolis	Market
Medical	Dental
Sales	$ 339,000	100.00%	$ 226,000	100.00%	$ 113,000	100.00%
Variable expenses	203,400	60.00%	144,640	64.00%	58,760	52.00%
Contribution margin	135,600	40.00%	81,360	36.00%	54,240	48.00%
Traceable fixed expenses	37,290	11.00%	13,560	6.00%	23,730	21.00%
Market segment margin	98,310	29.00%	$ 67,800	30.00%	$ 30,510	27.00%
Common fixed expenses not traceable to markets	16,950	5.00%
Office segment margin	$ 81,360	24.00%

The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,650. Marketing studies indicate that such a campaign would increase sales in the Medical market by $45,200 or increase sales in the Dental market by $39,550.

Required:

1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market?

2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market?

3. In which of the markets would you recommend that the company focus its advertising campaign?

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