Exercise 6-16 Working with a Segmented Income Statement; Break-Even Analysis [LO6-4, LO6-5]

[The following information applies to the questions displayed below.]

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 given below:

					Office
	Total Company	Chicago	Minneapolis
Sales	$	1,050,000	100.0	%	$	210,000	100	%	$	840,000	100	%
Variable expenses		567,000	54.0	%		63,000	30	%		504,000	60	%
Contribution margin		483,000	46.0	%		147,000	70	%		336,000	40	%
Traceable fixed expenses		235,200	22.4	%		109,200	52	%		126,000	15	%
Office segment margin		247,800	23.6	%	$	37,800	18	%	$	210,000	25	%
Common fixed expenses not traceable to offices		168,000	16.0	%
Net operating income	$	79,800	7.6	%

References

1.	Compute the break-even point for the Chicago office and for the Minneapolis office. (Round "CM ratio" to 2 decimal places and final answers to the nearest whole dollar amount.)

2.	By how much would the company?s net operating income increase if Minneapolis increased its sales by $105,000 per year? Assume no change in cost behavior patterns.

3.	Refer to the original data. Assume that sales in Chicago increase by $70,000 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs.

a.	Prepare a new segmented income statement for the company. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))

Exercise 6-16 Working with a Segmented Income Statement; Break-Even Analysis [LO6-4, LO6-5] [The following information applies to the questions displayed below.] Raner, Harris, & Chan is a consulting firm that specializes in information systems for me clinics. The firm has two officesone in Chicago and one in Minneapolis. The firm classifies of consulting jobs as variable costs. A contribution format segmented income statement fo most recent year is given below: Office Sales Variabl e expense s Contrib ution margin Tracea ble fixed expense s Office segmen t margin Comm on fixed expense s not trace able to offices Net operatin g Total Company 1,050,0 $ 100.0% 00 567,00 0 54.0% 483,00 0 46.0% 235,20 0 22.4% 247,80 0 23.6% 168,00 0 16.0% $ 79,800 7.6% Chicago 210,00 $ 100% 0 63,000 $ Minneap 840,00 $ 0 30% 504,00 0 147,00 0 70% 336,00 0 109,20 0 52% 126,00 0 37,800 18% $ 210,00 0 income References 1. Compute the break-even point for the Chicago office and for the Minneapolis office. (R ratio" to 2 decimal places and final answers to the nearest whole dollar amount. 2. By how much would the company's net operating income increase if Minneapolis increa $105,000 per year? Assume no change in cost behavior patterns. 3. Refer to the original data. Assume that sales in Chicago increase by $70,000 next year Minneapolis remain unchanged. Assume no change in fixed costs. a. Prepare a new segmented income statement for the company. (Round your percen decimal place (i.e .1234 should be entered as 12.3))