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[The following information applies to the questions displayed below.] Raner, Harris & Chan is a consulting...

[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: Office Total Company Chicago Minneapolis Sales $ 1,012,500 100.0 % $ 202,500 100 % $ 810,000 100 % Variable expenses 546,750 54.0 % 60,750 30 % 486,000 60 % Contribution margin 465,750 46.0 % 141,750 70 % 324,000 40 % Traceable fixed expenses 226,800 22.4 % 105,300 52 % 121,500 15 % Office segment margin 238,950 23.6 % $ 36,450 18 % $ 202,500 25 % Common fixed expenses not traceable to offices 162,000 16.0 % Net operating income $ 76,950 7.6 % 3. Assume that sales in Chicago increase by $67,500 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs. a. Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (i.e. 0.1234 should be entered as 12.3).)

Homework Answers

Answer #1
  • Requirement 3

Total Company

Chicago

Minneopolis

Sales

$1,080,000

100.0%

$270,000 [202500 + 67500]

100.0%

$810,000

100.0%

Variable expenses

$567,000

52.5%

$81,000 [270000 x 30%]

30.0%

$486,000

60.0%

Contribution margin

$513,000

47.5%

$189,000

70.0%

$324,000

40.0%

Traceable fixed expenses

$226,800

21.0%

$105,300

39.0%

$121,500

15.0%

Office segment margin

$286,200

26.5%

$83,700

31.0%

$202,500

25.0%

Common fixed expenses not traceable to offices

$162,000

15.0%

%

Net operating income

$124,200

11.5%

%

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