Determine the increase in net operating income

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Reference no: EM13491755

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 \$450,000 100% \$300,000 100% \$150,000 100% Variable expenses 270,000 60% 195,000 65% 75,000 50% Contribution margin 180,000 40% 105,000 35% 75,000 50% Traceable fixed expenses 54,000 12% 15,000 5% 39,000 26% Market segment margin 126,000 28% \$90,000 30% \$36,000 24% Common fixed expensesnot traceable to markets 13,500 3% Office segment margin \$112,500 25%

The company would like to initiate an intensive advertising campaign in one of the two market segmentsduring the next month. The campaign would cost \$6,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by \$52,500 or increase sales in the Dental market by \$45,000.

Required:
Determine the increase in net operating income in each market if the advertising campaign were to be initiated in that market.(Omit the "tiny_mce_markerquot; sign in your response.)

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