PLEASE DO NOT LEAVE PARTIAL ANSWER. I NEED ALL. Exercise 6-17 Working with a Seg

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PLEASE DO NOT LEAVE PARTIAL ANSWER. I NEED ALL.

Exercise 6-17 Working with a Segmented Income Statement LO6-4] 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 Assume that Minneapolis' sales by major market are Market Minneapolis Medical Dental Sales Variable expenses Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to Office segment margin $450,000 100% $300,000 100% $150,000 100% 75,000 50% 75,000 50% 39,000 26% 126,000 28% $90,000 30% $36,000 24% 270,000 60% 195,000 65% 180,000 40% 105,000 35% 5% 54,000 12% 15,000 markets 13,500 $112,500 3% 25% 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 $6,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $52,500 or increase sales in the Dental market by $45,000 Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?

Explanation / Answer

1 Change in profit = (52500*35%)-6000= 12375 Company's profit will increase by $12375 2 Change in profit = (45000*50%)-6000= 16500 Company's profit will increase by $16500 3 Dental Market

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