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Thursday, 2 August 2012

Marple Associates is a consulting firm that specializes in information


Marple Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices—one in Houston and one in Dallas. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the company’s most recent year is given below:






Office

Total Company
Houston
Dallas
  Sales
$
750,000  
100.0
%
$
150,000  
100
%
$
600,000  
100
%
  Variable expenses

405,000  
54.0


45,000  
30


360,000  
60














  Contribution margin

345,000  
46.0


105,000  
70


240,000  
40

  Traceable fixed expenses

168,000  
22.4


78,000  
52


90,000  
15














  Office segment margin

177,000  
23.6

$
27,000  
18
%
$
150,000  
25
%





















  Common fixed expenses not
    traceable to offices

120,000  
16.0






















  Net operating income
$
57,000  
7.6
%









Required:

1.
By how much would the company’s net operating income increase if Dallas increased its sales by $75,000 per year? Assume no change in cost behavior patterns. (Omit the "$" sign in your response.)


  Net operating income
$ 30,000 correct  

2.
Refer to the original data. Assume that sales in Houston increase by $50,000 next year and that sales in Dallas remain unchanged. Assume no change in fixed costs.






a.
Prepare a new segmented income statement for the company. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)




Segments

Total Company
Houston
Dallas

      Amount
      %
      Amount
      %
      Amount
      %
  Sales correct
$ 800,000 correct   
100 correct   
$ 200,000 correct   
100 correct   
$ 600,000 correct   
100 correct   
  Variable expenses correct
420,000 correct   
52.5 correct   
60,000 correct   
30 correct   
360,000 correct   
60 correct   







  Contribution margin correct
380,000 correct   
47.5 correct   
140,000 correct   
70 correct   
240,000 correct   
40 correct   
  Traceable fixed expenses correct
168,000 correct   
21.0 correct   
78,000 correct   
39 correct   
90,000 correct   
15 correct   







  Office segment margin correct
212,000 correct   
26.5 correct   
62,000 correct   
31 correct   
150,000 correct   
25 correct   
  Common fixed expenses not traceable to segments correct
120,000 correct   
15.0 correct   















  Net operating income (loss) correct
$ 92,000 correct   
11.5 correct