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.
Assume that Minneapolis'' sales by major market are as follows:
Market
Minneapolis Medical Dental
Sales $510,000 100% $340,000 100% $170,000 100%
Variable expenses
306,000
60%
221,000
65%
85,000
50%
Contribution margin 204,000 40% 119,000 35% 85,000 50%
Traceable fixed expenses
61,200
12%
17,000
5%
44,200
26%
Market segment margin 142,800 28%
$102,000
30%
$40,800
24%
Common fixed expenses
not traceable to markets 15,300 3%
Office segment margin
$127,500
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 $6,800. Marketing studies indicate that such a campaign would increase sales in the Medical market by $59,500 or increase sales in the Dental market by $51,000.
Required:
Determine the increase in net operating income in each market if the advertising campaign were to be initiated in that market. (Omit the "$" sign in your response.)
Medical Dental
Increase in net operating income $ $
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