Raner, Harris, & Chan is a consulting firm that specializes in information syste

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. Assume that Minneapolis' sales by major market are: 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 $8,400. Marketing studies indicate that such a campaign would increase sales in the Medical market by $73,500 or increase sales in the Dental market by $63,000. Required: 1-a. Calculate the increased segment margin.

Explanation / Answer

Calculation of Increased Segment margin after intensive advertising Campaign Market Medical Dental In $ In $ Sales        4,93,500        2,73,000 (-) Variable Exp.        3,20,775        1,36,500 Contribution Margin        1,72,725        1,36,500 (-) Traceable Fixed expenses            29,400            63,000 Market Segment margin        1,43,325            73,500 (-) Market Segment margin before advertising campaign        1,26,000            50,400 Increased Segment Margin            17,325            23,100 Note : Advertisement campaign cost is traceable cost ,hence considered under Traceable fixed exp.

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