Middleton Associates is a consulting firm that specializes in information system

Question

Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices-one in Toronto and one in Vancouver. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the company's most recent year is given below: Office Toronto Total Company 1,000,000 Vancouver 820,000 100% 100.00% $180,000 100% $ Sales 492,000 60 Variable expenses 546,000 54.60 54,000 30 328,000 98,400 12 229,600 28% 126,000 Contribution margin Traceable fixed expenses 454,000 45.40 70 40 172,200 17.22 73,800 41 Office segment margin 281,800 28.18 $52,200 29% $ Common fixed expenses noft traceable to offices 102,500 10.25 Operating income $179,300 17.93% Required 1 By how much would the company's operating income increase if Vancouver increased its sales by $90,000 per year? Assume no change in cost behaviour patterns Net operating income 2-a. Refer to the original data. Assume that sales in Toronto increase by $25,000 next year and that sales in Vancouver remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage answers to 2 decimal places.) Segments Total Company Toronto Vancouver Amount Amount Amount 0.00 0.00 0.00 00.00 0 .00 S 0 0.00 0.00

Explanation / Answer

1 Net operating income=90000*40% = 36000 Total Toronto Vancouver Amount % Amount % Amount % Sales 1025000 100.00% 205000 100.00% 820000 100.00% Variable expenses 553500 54.00% 61500 30.00% 492000 60.00% Contribution margin 471500 46.00% 143500 70.00% 328000 40.00% Traceable fixed expenses 172200 16.80% 73800 36.00% 98400 12.00% Market segment margin 299300 29.20% 69700 34.00% 229600 28.00% Common fixed expenses 102500 10.00% Net operating income 196800 19.20%

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