Raner, Harris & Chan is a consulting firm that specializes in information systems for medical...
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Accounting
Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone 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 companys most recent year is given:
Office
Total Company
Chicago
Minneapolis
Sales
$
487,500
100.0
%
$
97,500
100
%
$
390,000
100
%
Variable expenses
263,250
54.0
%
29,250
30
%
234,000
60
%
Contribution margin
224,250
46.0
%
68,250
70
%
156,000
40
%
Traceable fixed expenses
109,200
22.4
%
50,700
52
%
58,500
15
%
Office segment margin
115,050
23.6
%
$
17,550
18
%
$
97,500
25
%
Common fixed expenses not traceable to offices
78,000
16.0
%
Net operating income
$
37,050
7.6
%
3. Assume that sales in Chicago increase by $32,500 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs.
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