Raner, Harris, & Chan is a consulting firm that specializes in information syste

Question

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. Assume that Minneapolis' sales by major market are as follows: 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 $8,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $70,000 or increase sales in the Dental market by $60,000. Determine the increase in net operating income in each market if the advertising campaign were to be initiated in that market. (Omit the "$" sign in your response.)

Explanation / Answer

Profit increase medical = 16500 profit increase dental = 22000 Medical Calculations Sale 470,000 * 35% = 164500 contribution margin less fixed expenses of 20,000 +8000(new marketing) = 136500 = new profit new profit - old profit = change , 136500-120,000 =16500 Dental Calculations Sale 260,000 * 50% = 130000 contribution margin less fixed expenses of 52,000 +8000(new marketing) = 70000 = new profit = 70,000 new profit - old profit = change , 70000-48000 =22000

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