30% 4% $320000 $530.000 $300000 Required Prepare a contribution format income st

Question

30% 4% $320000 $530.000 $300000 Required Prepare a contribution format income statement segmented by geographic market. as requested by the president. The company's sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising is increased by S25000 Would you recom- mend the increased advertising? Show computations to support your answer 2. EXERCISE 11-3 Working with a Segmented Income Statement ILO1l tiddleton Associates is a consulting firm that specializes in information systems for con- struction and landscaping companies. The firm has two offices-one in Toronto and one in r. The firm classifies the direct costs of consulting jobs as variable costs. A segmented Vancouve cont tribution format income statement for the company's most recent year is given below given below Office Total Company Toronto Vancouver Sales Variable expenses Contribution margin.. Traceable fixed expenses.... Office segment margin. Common fixed expenses $75000 100096 S150000 100% s600000 00% 405000 540 345000 460 45,000 30 105000 70 240000 40 90000 15 158000 224 26 S90000 56 17000236 $21000 18% S150000 25% not traceable to offices Operating income 120000 160 S57000 76% Required 1. By how much would the company's operating income increase if Vancouver increased its 2 Refer to the original data. Assume that sales in Toronto increase by $50.000 next year and a. Prepare a new segmented income statement for the company using the above format. Observe from the income statement you have prepared that the CM ratio for Toronto sales by $75.000 per year? Assume no change in cost behaviour patterns. that sales in Vancouver remain unchanged. Assume no change in fixed costs Show both amounts and percentages. b. has remained unchanged at 70% (the same as in the above data) but that the segment margin ratio has changed. How do you explain the change in the segment margin ratio? XERCISE 11-4 Working with a Segmented Income Statement ILO1 eter to the data in Exercise 11-3. Assume that Vancouver's sales by major m ollows:

Explanation / Answer

1)Operating Profit if sales increased by 75,000 in vancouver

Current Profit before fixed cost

Torento - 27,000

Vancouver - 150,000

Increased Operating Profit in Vancouver= 75000*40%= 30,000

So revised Vancouver Profit will be 150,000+30,000= 180,000

So Revised total operating profit will be 57,000+30,000= 87,000

2)Increase sales of torento by 50,000

Contribution will be the value by which the operating profit of the company will be increased i.e 70%

Therefore operating profit will increase by 35,000(50000*70%)

So the revised operating profit will be 57,000+35,000= 92,000

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