Question

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 Office Total Company $1,212,500 100.0% 546,250 54.0 les 5810,000 lees 202, see 6e, 75e Sales Variable expenses Contribution margin Teaceable fixed expenses office segment margin Comon fixed expenses not traceable to offices Net operating income 22.45 23.6% 16. 105,3ee 36,450 $ 5202.500 238,95€ 162.00 76,950 25% $ 3. Assume that sales in Chicago increase by $67.500 next year and that sales in Minneapolis remain unchanged. Assume no change foot a. Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (Le 0.1234 should be entered as 1231-) Total Company Chicago s Segments Minneapolis Amount Amount % Amo

Answer 1

Solution :

Segment Income Statement
			Office
Particulars	Total Company		Chicago		Minneapolis
Sales	$1,080,000.00	100.0%	$270,000.00	100.0%	$810,000.00	100.0%
Variable expenses	$567,000.00	52.5%	$81,000.00	30.0%	$486,000.00	60.0%
Contribution margin	$513,000.00	47.5%	$189,000.00	70.0%	$324,000.00	40.0%
Traceable fixed expenses	$226,800.00	21.0%	$105,300.00	39.0%	$121,500.00	15.0%
Office segment margin	$286,200.00	26.5%	$83,700.00	31.0%	$202,500.00	25.0%
Common fixed expenses not traceable to offices	$162,000.00	15.0%
Net operating income	$124,200.00	11.5%