Working with a Segmented Income Statement
Refer to the data in Exercise 6–14.Assume that Dallas’ sales by major market are as follows:
| Market | |||||
| Dallas | Construction Clients | Landscaping Clients | |||
Sales | $600,000 | 100,0% | $400,000 | 100% | $200,000 | 100% |
Variable expenses | 360,000 | 60 | 260,000 | 65 | 100,000 | 50 |
Contribution margin | 240,000 | 40 | 140,000 | 35 | 100,000 | 50 |
Traceable fixed expenses | 72,000 | 12 | 20,000 | 5 | 52,000 | 26 |
Market segment margin | 168,000 | 28 | $ 120,000 | 30% | $48,000 | 24% |
Common fixed expenses not traceable to Markets | 18,000 | 3 | ||||
Office segment margin | $150,000 | 25% | ||||
The company would like to initiate an intensive advertising campaign in one of the two markets during the next month. The campaign would cost $8,000. Marketing studies indicate that such a campaign would increase sales in the construction market by $70.000 or increase sales in the land–scaping market by $60,000.
Required:
1. In which of the markets would you recommend that the company focus its advertising campaign? Show computations to support your answer.
2. In Exercise 6–14. Dallas shows $90,000 in traceable fixed expenses. What happened to the $90.000 in this exercise?
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