Working with segmented income statement

Reference no: EM1319688

Assume that Dallas' sales by major market are as follows:

		Market
	Dallas	Construction Clients	Landscaping Clients
Sales.....	$600,000	100.0%	$400,000	100%	$200,000	100%
Variable expenses...	360,000	60	260,000	65	100,000	50
Contribution margin....	240,000	40	140,000	35	100,000	50
Traceable fixed expenses....	72,000	12	20,000	5	52,000	26
Office segment margin....	168,000	28	$120,000	30%	$48,000	24%
Common fixed expenses not traceable to markets....	18,000	3
Office segment margin....	$150,000	25%

The company would like to initiate an intensive advertising campaign in one of the two markets during the next month. The campaign would cost $8000. Marketing studies indicate that such a campaign would increase sales in the construction market by $70,000 or increase sales in the landscapign market by $60,000.

Required:

1. In which of the markets would you recommend that the company focus its advertising campaign? Show computations to support your answer.

2. In Exercise 12-11, Dallas shows $90,000 in traceable fixed expenses. What happened to the $90,000 in this exercise?

Reference no: EM1319688

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