Required information [The following information applies to the questions display

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Required information [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 360,000 60% 240,000 0 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% 405,000 54.0% 345,000 46.0% 168,000 22.4% 45,00 105,000 78,000 70% 52% 90,000 15% 177,000 23.6% $ 27,000 18% $150,000 25% 120,000 16.0% $ 57,000 7.6% 2. By how much would the company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns Net operating income increase

Explanation / Answer

Answer)

It is assumed that no fixed costs(traceble or non traceble) change with change in sales.

Net operating income increase:$30000(I.e $87000-$57000)

Total sales:

($750000+$75000)-(($675000×60%)+$45000+$168000-$120000))

=$87000

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