Required information [The following information applies to the questions displayed below.] Raner, Harris and 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: Office Total Company Chicago Minneapolis $ 300,000 Sales $ 150,000 Variable expenses Contribution margin 100% 50% 50% 28% 22% 45,000 105,000 78,000 $ 27,000 180,000 120,000 48,000 Traceable fixed expenses Office segment margin $ 72,000 Common fixed expenses not traceable to offices 14% Net operating income 8% Assume that Minneapolis' sales by major market are: Market Medical Dental Sales Variable expenses Minneapolis $ 300,000 100% 180,000 60% 120,000 40% 33,000 11% Contribution margin $ 200,000 100% $ 100,000 100% 128,000 64% 52,000 52% 72,000 36% 48,000 48% 12,000 6% 21,000 21% $ 60,000 30% Traceable fixed expenses Market segment margin 29% $ 27,000 27% 87,000 15,000 24% Common fixed expenses not traceable to markets Office segment margin 5% $ 72,000 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 $5,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $40,000 or increase sales in the Dental market by $35,000. 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? $ 450,000 225,000 225,000 126,000 99,000 63,000 $ 36,000 100% 30% 70% 52% 18% 100% 60% 40% 16 % 24%
Required information [The following information applies to the questions displayed below.] Raner, Harris and 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: Office Total Company Chicago Minneapolis $ 300,000 Sales $ 150,000 Variable expenses Contribution margin 100% 50% 50% 28% 22% 45,000 105,000 78,000 $ 27,000 180,000 120,000 48,000 Traceable fixed expenses Office segment margin $ 72,000 Common fixed expenses not traceable to offices 14% Net operating income 8% Assume that Minneapolis' sales by major market are: Market Medical Dental Sales Variable expenses Minneapolis $ 300,000 100% 180,000 60% 120,000 40% 33,000 11% Contribution margin $ 200,000 100% $ 100,000 100% 128,000 64% 52,000 52% 72,000 36% 48,000 48% 12,000 6% 21,000 21% $ 60,000 30% Traceable fixed expenses Market segment margin 29% $ 27,000 27% 87,000 15,000 24% Common fixed expenses not traceable to markets Office segment margin 5% $ 72,000 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 $5,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $40,000 or increase sales in the Dental market by $35,000. 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? $ 450,000 225,000 225,000 126,000 99,000 63,000 $ 36,000 100% 30% 70% 52% 18% 100% 60% 40% 16 % 24%
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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