Question

Homeworki Saved Help Save & Exit Submit Check my work 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: Assume that Minneapolis' sales by major market are: Market Minneapolis $540,000 324,000 216,000 64,800 Medical Dental $180,000 90,000 90,000 46, 800 $ 43,200 Sales Variable expenses 100% $360,000 234,000 126,000 18,000 100% 100% 60% 50 658 Contribution margin Traceable fixed expenses 401 358 50% 12 58 26% Market segment margin Common fixed expenses 151,200 28% $108,000 30% 24 not traceable to markets 16,200 31 office segment margin $135,000 25 The company would like to initiate an intensive advertising campaign in one of the two maket segments during the next month. The campaign would cost $7,200.. Marketing studies indicate that such a campaign would increase sales in the Medical market by $63,000 or increase sales in the Dental market by $54,000. 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. < Prev 18 of 20 Next >

Answer 1

1
Increase in sales	63000
X Contribution margin ratio	35%
Contribution margin	22050
Less: Fixed expenses	7200
Profits increase by	14850
2
Increase in sales	54000
X Contribution margin ratio	50%
Contribution margin	27000
Less: Fixed expenses	7200
Profits increase by	19800
3
Dental Market