Question

3 ! Part 1 of 2 Required information Exercise 6-16 Working with a Segmented Income Statement; Break-Even Analysis (LO6-4, LO6-5] [The following information applies to the questions displayed below.) 5 points 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: Skipped eBook Ask Total Company $1,012,500 100.0% 546,750 54.0% 465,750 46.0% 226,800 22.4% 238,950 23.6% 162,000 16.0% $ 76,950 7.6% Office Chicago Minneapolis $ 202,500 100% $ 810,000 100% 60,750 30% 486,000 60% 141,750 70% 324,000 40% 105,300 52% 121,500 15% $ 36,450 18% $ 202,500 25% Sales Variable expenses Contribution margin Traceable fixed expenses office segment margin Common fixed expenses not traceable to offices Net operating income Print References

Answer 1

Solution

Net Operating income Increase

$   40,500.00

Working

Income Statement
			Office
	Total Company		Chicago		Minneapolis
	Amount	%	Amount	%	Amount	%
Sales	$ 1,113,750	100.0%	$ 202,500	100.0%	$ 911,250	100.0%
Variable cost	$ 607,500	54.5%	$ 60,750	30.0%	$ 546,750	60.0%
Contribution margin	$ 506,250	45.5%	$ 141,750	70.0%	$ 364,500	40.0%
Traceable fixed cost	$ 226,800	20.4%	$ 105,300	52.0%	$ 121,500	13.3%
Office segment margin	$ 279,450	25.1%	$ 36,450	18.0%	$ 243,000	26.7%
Common fixed cost	$ 162,000	14.5%
Net Operating income	$ 117,450	10.5%

.

Income before	$   76,950.00
Income after increase in sales	$ 117,450.00
Net Operating income Increase	$   40,500.00