Exercise 12-13 Working with a Segmented Income Statement [LO1] Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format income statement for the company's most recent year is given below: Office Total Company Chicago Minneapolis Sales $ 787,500 100 % $ 157,500 100 % $ 630,000 100 % Variable expenses 425,250 54 % 47,250 30 % 378,000 60 % Contribution margin 362,250 46 % 110,250 70 % 252,000 40 % Traceable fixed expenses 176,400 22.4 % 81,900 52 % 94,500 15 % Office segment margin 185,850 23.6 % $ 28,350 18 % $ 157,500 25 % Common fixed expenses not traceable to offices 126,000 16 % Net operating income $ 59,850 7.6 % Requirement 1: By how much would the company's net operating income increase if Minneapolis increased its sales by $78,750 per year? Assume no change in cost behavior patterns. (Omit the "$" sign in your response.) Net operating income $ 31,500 Feedback: $78,750 40 % CM ratio = $31,500 increased contribution margin in Minneapolis. Because the fixed costs in the office and in the company as a whole will not change, the entire $31,500 would result in increased net operating income for the company. It is not correct to multiply the $78,750 increase in sales by Minneapolis 25% segment margin ratio. This approach assumes that the segment's traceable fixed expenses increase in proportion to sales, but if they did, they would not be fixed