By how much would the company net operating income increase

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Reference no: EM133050159

Problem - 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:

 

Total Company

Office

 

Chicago

Minneapolis

Sales

$975,000

100.0%

$195,000

100%

$780,000

100%

Variable expenses

526,500

54.0%

58,500

30%

468,000

60%

Contribution margin

448,500

46.0%

136,500

70%

312,000

40%

Traceable fixed expenses

218,400

22.4%

101,400

52%

117,000

15%

Office segment margin

230,100

23.6%

$35,100

18%

$195,000

25%

Common fixed expenses not traceable to offices

156,000

16.0%

 

 

 

 

 

Net operating income

$74,100

7.6%

 

 

 

 

Required - By how much would the company's net operating income increase if Minneapolis increased its sales by $97,500 per year? Assume no change in cost behavior patterns.

Reference no: EM133050159

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