Raner, Harris, & Chan is a consulting firm that specializes in information syste
ID: 2425733 • 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.
Market
Common fixed expenses
not traceable to markets
The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $40,000 or increase sales in the Dental market by $35,000.
Calculate the increased segment margin.
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.
Explanation / Answer
Computation of increased segment margin:
Minneapolis Medical Dental Incremental sales revenue 75,000 40,000 35,000 Contribution margin ratio 41.6% 36% 48% Contribution margin 31,200 14,400 16,800 Incremental cost 5,000 Increased segment margin 26,200Related Questions
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