Homework SourseRaner Harris Chan is a consulting firm that specializes in
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:
2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $82,500 per year? Assume no change in cost behavior patterns.
3. Assume that sales in Chicago increase by $55,000 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs.
a. Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))
| Office | |||||||||||||||||
| Total Company | Chicago | Minneapolis | |||||||||||||||
| Sales | $ | 825,000 | 100.0 | % | $ | 165,000 | 100 | % | $ | 660,000 | 100 | % | |||||
| Variable expenses | 445,500 | 54.0 | % | 49,500 | 30 | % | 396,000 | 60 | % | ||||||||
| Contribution margin | 379,500 | 46.0 | % | 115,500 | 70 | % | 264,000 | 40 | % | ||||||||
| Traceable fixed expenses | 184,800 | 22.4 | % | 85,800 | 52 | % | 99,000 | 15 | % | ||||||||
| Office segment margin | 194,700 | 23.6 | % | $ | 29,700 | 18 | % | $ | 165,000 | 25 | % | ||||||
| Common fixed expenses not traceable to offices | 132,000 | 16.0 | % | ||||||||||||||
| Net operating income | $ | 62,700 | 7.6 | % | |||||||||||||
Solution
a. Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))
a. Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))
| Office | |||||||||||||||||
| Total Company | Chicago | Minneapolis | |||||||||||||||
| Sales | $ | 907,500 | 100.0 | % | $ | 165,000 | 100 | % | $ | 742,500 | 100 | % | |||||
| Variable expenses | 495,000 | 54.5 | % | 49,500 | 30 | % | 445,500 | 60 | % | ||||||||
| Contribution margin | 412,500 | 45.5 | % | 115,500 | 70 | % | 297,000 | 40 | % | ||||||||
| Traceable fixed expenses | 184,800 | 20.4 | % | 85,800 | 52 | % | 99,000 | 15 | % | ||||||||
| Office segment margin | 227,700 | 25.1 | % | $ | 29,700 | 18 | % | $ | 198,000 | 25 | % | ||||||
| Common fixed expenses not traceable to offices | 132,000 | 14.5 | % | ||||||||||||||
| Net operating income | $ | 95,700 | 10.5 | % | |||||||||||||
