Raner, Harris, & Chan is a consulting firm that specializes in information syste
ID: 2461242 • 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 glven below Office Total Company 243,000 54.0% 27,000 30% 216,000 60% 207,000 46.0% 63,000 70% 144,000 40% Minneapolls Sales Variable expenses Chicago $ 450,000 100.0% $ 90,000 100% $360,000 100% Contribution margin Traceable fixed expenses 100.8 00.22.4% 46,800 52% 54,000 15% Office segment margin 106,200 23.6% $ 16,200 18% $90,000 25% Common fixed expenses not traceable to offices 72.000 16.0% Net operating tncome $ 34,200 76%Explanation / Answer
Answer to 1(a)
Company wide break-even point = (Traceable Fixed Expense+Common Fixed Expense)/(Total Contribution Margin/Company Sales)
= (108000+72000) / (207000/450000)
= $391304
Thus, the company vide BEP is $391304
Answer to 1(b)
BEP for Chicago Office = 46800/(63000/90000) = $66,857
BEP for Minneapolis Office = 54000/(144000/360000) = $135,000
Answer 1(c)
Company wide break even point is greater than the sum of individual office. (the reason for this is it includes common fixed expense which are not traceable to individual offices)
Answer to 2
Increase Net Operating Income = 40% * $45000 = $18,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.