Question

Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two ofices one in Chicago and one in Minneapolis. The form classes 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: Sales Variable expenses Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets office segment margin Market Minneapolis Medical Dental $300,000 1008 $200,000 100 $100,000 1000 180,000 60% 128,000 64 52,000 528 120,000 400 72,000 368 48,000 488 33,000 116 12.000 6 21.000 218 87,000 298 $ 60,000 30 $ 27,000 15,000 58 72,000 240 The company would ke 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? Complete this question by entering your answers in the tabs below. Required Required Required How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? Company's profits Required 1 Required 2 >

Answer 1

campaign implemented If advertising Medical Market in the sales variable expenses Minneapolis 340000 205600 134400 38000 96400 Medical Dental 240000 100000 153600(647) 52000 86400 (36%) 48000 17000 21000 69400 27000 contribution margin (including Traceable fixed expense advertising Market sement monin Common fixed expenses not traceable to market Office segment margin 15000 81400 - company's profit will increase by $9400 2. If advertising campaign sales variable expenses contribution martin Traceable fixed expertis (including advertising Market Syment morgin - Common Axed expenses not braceable to morked Offiu segment morgin implemented Minneapolis 335000 198200 136800 38000 98800 in the Dental hooket Medical Dental 200000 135000 128000 70200 (52%) 72000 64800 (48%) 12000 26000 60000 38800 f 15000 83800 compony's proft will increase by $11800 3. Company should focus advertising campaign on Dental ma