Question

! Required Information SB Exercise 6-16 through Exercise 6-17 (Static) 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 Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Total Company $ 450,000 100% 225,000 50% 225,000 50% 126,800 28X 99,90 22% 63,80 14% $ 36,000 8% Office Chicago Minneapolis $ 158, eee 100% $ 300,000 100% 45,000 3ex 180,000 60x 105,000 7ex 120,000 40% 78,990 52% 48,000 16% $ 27,990 18% $ 72,000 24% Exercise 6-16 Part 2 (Static) Working with a Segmented Income Statement; Break-Even Analysis (LO6-4, LO6-5] 2. By how much would the company's net operating income increase if Minneapolis Increased its sales by $75,000 per year? Assume no change in cost behavior patterns. Net operating income increase

Answer 1

	Chicago	Minneapolis	total
sales	$    150,000.00	100%	$ 375,000.00	100%	$ 525,000.00	100%
variable expenses	$      45,000.00	30%	$ 180,000.00	48%	$ 225,000.00	43%
contribution margin	$   105,000.00	70%	$ 195,000.00	52%	$ 300,000.00	57%
traceable fixed expenses	$      78,000.00	52%	$   48,000.00	13%	$ 126,000.00	24%
office segment margin	$      27,000.00	18%	$ 147,000.00	39%	$ 174,000.00	33%
common fixed expenses					$   63,000.00	12%
net operating income					$ 111,000.00	21%

= 300,000 + 75,000