Home / Questions / EXERCISE 6 15 Working with a Segmented Income Statement LO4 Refer to the data in Exercise ...
EXERCISE 6–15 Working with a Segmented Income Statement [LO4]
Refer to the data in Exercise 6–14. Assume that Dallas’ sales by major market are as follows:
|
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 land- scaping market by $60,000.
Required:
1. In which of the markets would you recommend that the company focus its advertising cam- paign? Show computations to support your answer.
2. In Exercise 6–14, Dallas shows $90,000 in traceable fixed expenses. What happened to the
$90,000 in this exercise?
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