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 % $ 750,000 100%
Variable expenses 506,250 54.0% 56,250 30% 450,000 60%
Contribution margin 431,250 46.0% 131,250 70% 300,000 40%
Traceable fixed expenses 210,000 22.4% 97,500 52% 112,500 15%
Office segment margin 221,250 23.6% $33,750 18% $187,500 25%
Common fixed expenses
not traceable to offices 150,000 16.0%
Net operating income $71,250 7.6%
2. By how much would the company’s net operating income increase if Minneapolis increased its sales by $93,750 per year? Assume no change in cost behavior patterns.
please help! I really need it, thank you.