Required information The following information applies to th

Required information [The following information applies to the questions displayed below.] 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 office Total Company Chicago Minneapolis 360,000 60% 240,000 0 Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income $750,000 100.0% $150,000 100% $600,000 100% 405,000 54.0% 345,000 46.0% 168,000 22.4% 45,00 105,000 78,000 70% 52% 90,000 15% 177,000 23.6% $ 27,000 18% $150,000 25% 120,000 16.0% $ 57,000 7.6% 2. By how much would the company\'s net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns Net operating income increase

Solution

Answer)

It is assumed that no fixed costs(traceble or non traceble) change with change in sales.

Net operating income increase:$30000(I.e $87000-$57000)

Total sales:

($750000+$75000)-(($675000×60%)+$45000+$168000-$120000))

=$87000