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

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: Assume that Minneapolis’ sales by major market are: Market Minneapolis Medical Dental Sales $ 570,000 100 % $ 380,000 100 % $ 190,000 100 % Variable expenses 342,000 60 % 247,000 65 % 95,000 50 % Contribution margin 228,000 40 % 133,000 35 % 95,000 50 % Traceable fixed expenses 68,400 12 % 19,000 5 % 49,400 26 % Market segment margin 159,600 28 % $ 114,000 30 % $ 45,600 24 % Common fixed expenses not traceable to markets 17,100 3 % Office segment margin $ 142,500 25 % 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 $7,600. Marketing studies indicate that such a campaign would increase sales in the Medical market by $66,500 or increase sales in the Dental market by $57,000. Required: 1. How much would the company’s profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company’s profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?

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