Raner, Harris, & Chan is a consulting firm that specializes in information syste
ID: 2389128 • Letter: R
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. A contribution format income statement for the company's most recent year is given below:
526,500
54%
58,500
30%
468,000
60%
218,400
22%
101,400
52%
117,000
15%
$35,100
18%
$195,000
25%
$74,100
8%
Requirement 1:
By how much would the company's net operating income increase if Minneapolis increased its sales by $97,500 per year? Assume no change in cost behavior patterns.
Requirement 2:
Refer to the original data. Assume that sales in Chicago increase by $65,000 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage amounts to 2 decimal places.
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 income statement for the company's most recent year is given below:
Explanation / Answer
Requirement 1:
By how much would the company's net operating income increase if Minneapolis increased its sales by $97,500 per year? Assume no change in cost behavior patterns.
Total In % Chicago In % Minneapolis In % Sales $1,072,500 100.00% $195,000 100.00% $877,500 100.00% Variable expenses 585000 54.55% 58500 30.00% 526500 60.00% Contribution margin $487,500 45.45% 136500 70.00% $351,000 40.00% Traceable fixed expenses 218400 20.36% 101400 52.00% 117000 13.33% Office segment margin $269,100 25.09% 35100 18.00% $234,000 26.67% Common fixed expenses 156000 14.55% Net operating income $113,100 10.55%Related Questions
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