Question

Required information [The following information applies to the questions displayed below.] 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 below: Sales Office Total Company Chicago Minneapolis $450,000 100% $ 150,000 100% $300,000 100% 225,000 50% 45,000 30% 180,000 60% Variable expenses Contribution margin 225,000 126,000 50% 28% 105,000 70% 78,000 52% 120,000 40% 48,000 16% Traceable fixed expenses Office segment margin 99,000 22% $ 27,000 18% $ 72,000 24% Common fixed expenses not traceable to offices 63,000 14% Net operating income $36,000 8%

Answer 1

Requirement: 1 a,b,c Computation of BEP Sales point for the company and its segment as follows: BEP Calculation Total Segment Particulars Company Chicago Minneapolis Traceable Fixed cost 126000 78000 48000 Common fixed cost 63000 Total fixed cost (a) 189000 78000 480001 Contribution margin Ratio (b) 50% 70% 40% BEP in Dollar Sales =Total Fixed cost / Contribution margin ratio Bep sales (a/b) 378000 111429 120000 Company Break even point Requirement: 2 Statement for evaluation of increased sales of segment Minneapolis Particulars Amount Increase in sale of segment Minneapolis (a) 75000 x Contribution increase % (b) 40% Increase in net operating income (a*b) 30000

Requirement: 3 Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Untraceable cost Net operating Margin Total Company Amount % 500000 100.0% 240000 48.0% 260000 52.0% 126000 25.2% 134000 26.8% 63000 12.6% 71000 14.2% Chicago Amount 200000 60000 140000 78000 62000 % 100.0% 30.0% 70.0% 39.0% 31.0% Minneapolis Amount % 300000 100.0% 180000 60.0% 120000 40.0% 48000 16.0% 72000 24.0%