Q1) Suppose that Dallas' sales by major market are given below:
| |
|
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% |
|
|
|
|
Company would like to initiate intensive advertising campaign in one of two markets in the next month. Campaign would cost $8000. Marketing studies point to that such a campaign would increase sales in construction market by $70,000 or increase sales in landscapign market by $60,000.
Required:
1. In which of the markets would you suggest that company focus its advertising campaign? Illustrate computations to support your answer.
2. Dallas shows $90,000 in traceable fixed expenses. What occured to $90,000 in this exercise?