Assignment:
| Total Company |
Percentage |
Houston |
Dallas |
|
|
|
|
| Sales $750,000 |
100% |
$150,000 100% |
$600,000 100% |
| Variable expenses 405,000 |
54 |
45,000 30% |
360,000 60% |
| Contribution margin 345,000 |
46 |
105,000 70 |
240,000 40 |
| Traceable fixed expenses 168,000 |
22.4 |
78,000 52 |
90,000 15 |
| Office segment margin 177,000 |
24 |
27,000 18% |
$150,000 25% |
| Common fixed 120,000 |
16 |
|
|
| expenses not traceable to offices |
|
|
|
|
|
|
|
| Net operating income $57,000 |
7.60% |
|
|
Question 1. By how much would the company's net opertaing income increase if Dallas increased its sales by $75,000 Qper year? Assume no change in cost behavior patterns.
Question 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 cost.
a. Prepare a new segmented income statement for the company using the above format. Show both amounts and percentages.
b. Observe from the income statement you have prepared that CM ration for Houston has remained unchanged at 70%(the same as in the above data) but that the segment margin ration has changed. How do you explain the change in the segment margin ratio?