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Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics.

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 $ 637,500   100.0 %   $ 127,500   100 %   $ 510,000   100 %
Variable expenses   344,250   54.0 %     38,250   30 %     306,000   60 %
Contribution margin   293,250   46.0 %     89,250   70 %     204,000   40 %
Traceable fixed expenses   142,800   22.4 %     66,300   52 %     76,500   15 %
Office segment margin   150,450   23.6 %   $ 22,950   18 %   $ 127,500   25 %
Common fixed expenses not traceable to offices   102,000   16.0 %                        
Net operating income $ 48,450   7.6 %                        
 

2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $63,750 per year? Assume no change in cost behavior patterns.

3. Assume that sales in Chicago increase by $42,500 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).)

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Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics.
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 $ 937,500   100.0 %   $ 187,500   100 %   $...
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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 $ 412,500 100.0 % $ 82,500 100 % $ 330,000 100 % Variable expenses 222,750 54.0 % 24,750 30...
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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 $ 637,500 100.0 % $ 127,500 100 % $ 510,000 100 % Variable expenses 344,250 54.0 % 38,250 30...
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