The company would like to initiate an intensive advertising

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Reference no: EM13589705

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

Clients

Sales

$

600,000

100

%

$

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














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.)


           Construction

        Clients

          Landscaping

      Clients

  Increased segment margin

$

$

Reference no: EM13589705

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