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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.
Assume that Dallas' sales by major market are as follows:
Market
Dallas
Construction
Clients
Landscaping
Sales
$
600,000
100
%
400,000
200,000
Variable expenses
360,000
60
260,000
65
100,000
50
Contribution margin
240,000
40
140,000
35
Traceable fixed expenses
72,000
12
20,000
5
52,000
26
Market 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 $8,000. Marketing studies indicate that such a campaign would increase sales in the construction market by $70,000 or increase sales in the landscaping market by $60,000.
Required:
1a.
Calculate the increased segment margin. (Omit the "$" sign in your response.)
Increased segment margin
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