Exercise 6-17 Working with a Segmented Income Statement [LO6-4] Raner, Harris &
ID: 2564902 • Letter: E
Question
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 Minneapolls. The firm classifies the direct costs of consulting jobs as varlable costs. A contribution format segmented Income statement for the company's most recent year is glven: Assume that Minneapolls' sales by major market are Market Minneapolis $540,000 Medical Dental Sales Variable expenses Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets Office segment margin 100% s360 ,000 100% 324,000 60% 234,000 65% 216,000 40% 126,000 35% 5% $180,000 98,000 90,000 46,800 100% 50% 50% 26% 64,800 12% 18,8e8 151,200 28% $108,000 30% $43,200 24% 16,288 3% $135,000 25% The company would like to Initiate an Intenslve advertising campaign In one of the two market segments during the next month. The campaign would cost $7,200. Marketing studies Indicate that such a campaign would Increase sales In the Medical market by $63,000 or Increase sales In the Dental market by $54,000 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 campalgn? Complete this question by entering your answers in the tabs below Required 1Required 2Required 3 How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? Required2 >Explanation / Answer
1 Change in profits =(63000*35%)-7200= 14850 increase 2 Change in profits =(54000*50%)-7200= 19800 increase 3 Dental