Raney, 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:

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?

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Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income $ 187,500 Total Company $ 937,500 100.0% 506,250 54.0% 431,250 46.0% 210,000 22.4% 56,250 131,250 97,500 221,250 23.6% $ 33,750 150,000 16.0% 71,250 $ 7.6% Chicago Office Minneapolis 100% $ 750,000 450,000 30% 70% 52% 300,000 112,500 18% $ 187,500 100% 60% 40% 15% 25% Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income $ 187,500 Total Company $ 937,500 100.0% 506,250 54.0% 431,250 46.0% 210,000 22.4% 56,250 131,250 97,500 221,250 23.6% $ 33,750 150,000 16.0% 71,250 $ 7.6% Chicago Office Minneapolis 100% $ 750,000 450,000 30% 70% 52% 300,000 112,500 18% $ 187,500 100% 60% 40% 15% 25%

Answer rating: 100% (QA)

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