Question

Required information [The following information apples 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 classifles 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 $1,012,50e 546,750 465,750 226, 880 Chicago Minneapolis $ 810,008 486,eee Sales 1ее. ex $ 202,500 1ee% 180% Variable expenses Contribution margin Traceable fixed expenses office segment margin 54.0% 38% б0% 68,75e 141,75e 185,300 46.0% 78% 48 % 324,e88 121,50e 15 % 22.4% 52% $ 18% $ 202,5ee 25% 238,950 23.6% 36,450 Common fixed expenses not traceable to offices 162,ee8 16.0% $ 7.6% 76,950 Net operating income 2. By how much would the company's net operating income increase if Minneapolis increased its sales by $101,250 per year? Ass no change in cost behavior patterns. Net operating income increase

Answer 1

Answer

• Requirement 2

>No change in cost behaviour patter.
>Net Operating Income increase = Increase in Contribution margin = $ 101,250 x 40% = $ 40,500

>Answer = $ 40,500