Raner, Harris & Chan is a consulting firm that specializes in information system
ID: 2411821 • Letter: R
Question
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 Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income $750,000 100.0% $150,000 100% $600,000 100% 60% 40% 15% 177,000 23.6% $ 27,000 18% $150,000 25% 30% 405,000 54.0% 345,000 46.0% 168,000 22.4% 45,000 105,000 78,000 360,000 240,000 90,000 52% 120,000 16.0% 57,000 7.6% Required: 1-a. Compute the companywide break-even point in dollar sales 1-b. Compute the break-even point for the Chicago office and for the Minneapolis office 1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Chicago Minneapolis Total Sales 150,000.00 600,000.00 750,000.00 Less Variable Expenses (45,000.00) (360,000.00) (405,000.00) Contribution Margin 105,000.00 240,000.00 345,000.00 Fixed cost (78,000.00) (90,000.00) (168,000.00) Office segment margin 27,000.00 150,000.00 177,000.00 Common Fixed expenses (120,000.00) Net operating income 57,000.00 CM Ratio = Contribution/sales 70.00% 40.00% 46.00% BEP in sales $ = Fixed cost/CM Ratio 111,428.57 225,000.00 626,086.96 Company wide break even point is greater than the sum of Chicago and Minneapolis break even points
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