Exercise 6-16 Working with a Segmented Income Statement; Break-Even Analysis [LO6-4, LO6-5] [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 $ 1,125,000 100.0 % $ 225,000 100 % $ 900,000 100 % Variable expenses 607,500 54.0 % 67,500 30 % 540,000 60 % Contribution margin 517,500 46.0 % 157,500 70 % 360,000 40 % Traceable fixed expenses 252,000 22.4 % 117,000 52 % 135,000 15 % Office segment margin 265,500 23.6 % $ 40,500 18 % $ 225,000 25 % Common fixed expenses not traceable to offices 180,000 16.0 % Net operating income $ 85,500 7.6 % Exercise 6-16 Part 2 2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $112,500 per year? Assume no change in cost behavior patterns. 3. Assume that sales in Chicago increase by 75,000 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 one decimal place (i.e. 0.1234 should be entered in as 12.3).)

Name: Techwhiff
Address: 1520 Lavalette Ave, Elkins, WV 26241, USA, Elkins, 26241, US
Telephone: +1 681-298-8325
Price range: 10000

Answer Requirement 2 A Increase in Sales of Minneapolis $112,500 B Contribution margin ratio of Minneapolis 40% C = A x B Net Operating Income would increase $45,000 Requirement 3 ‘a’ Total Company Chicago Minneopolis Sales $1,200,000 100.0% $300,000 [225000 + 75000] 100.0% $900,000 100.0% Variable expenses $630,000 52.5% $90,000 [300000 x 30%] 30.0% $540,000 60.0% Contribution margin $570,000 47.5% $210,000 70.0% $360,000 40.0% Traceable fixed expenses $252,000 21.0% $117,000 39.0% $135,000 15.0% Office segment margin $318,000 26.5% $93,000 31.0% $225,000 25.0% Common fixed expenses not traceable to offices $180,000 15.0% % Net operating income $138,000 11.5% % .

Exercise 6-16 Working with a Segmented Income Stateme…

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Requirement 2

A	Increase in Sales of Minneapolis	$112,500
B	Contribution margin ratio of Minneapolis	40%
C = A x B	Net Operating Income would increase	$45,000

Requirement 3 ‘a’

	Total Company		Chicago		Minneopolis
Sales	$1,200,000	100.0%	$300,000 [225000 + 75000]	100.0%	$900,000	100.0%
Variable expenses	$630,000	52.5%	$90,000 [300000 x 30%]	30.0%	$540,000	60.0%
Contribution margin	$570,000	47.5%	$210,000	70.0%	$360,000	40.0%
Traceable fixed expenses	$252,000	21.0%	$117,000	39.0%	$135,000	15.0%
Office segment margin	$318,000	26.5%	$93,000	31.0%	$225,000	25.0%
Common fixed expenses not traceable to offices	$180,000	15.0%			%
Net operating income	$138,000	11.5%			%

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					Office
	Total Company				Chicago				Minneapolis
Sales	$	1,125,000	100.0	%	$	225,000	100	%	$	900,000	100	%
Variable expenses		607,500	54.0	%		67,500	30	%		540,000	60	%
Contribution margin		517,500	46.0	%		157,500	70	%		360,000	40	%
Traceable fixed expenses		252,000	22.4	%		117,000	52	%		135,000	15	%
Office segment margin		265,500	23.6	%	$	40,500	18	%	$	225,000	25	%
Common fixed expenses not traceable to offices		180,000	16.0	%
Net operating income	$	85,500	7.6	%

Exercise 6-16 Working with a Segmented Income Statement; Break-Even Analysis [LO6-4, LO6-5] [The following information applies...

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