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Chapter 11 In Class Questions Solutions.pdf

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Trish Stringer

In Class 111 Working with a Segmented Income Statement Required 1 By how much would the companys operating income increase if Vancouver increased its sales by 75000 per yearAssume no change in behaviour patterns7500040 CM ratio30000 increased contribution margin in Vancouver Since the fixed costs in the office and in the company as a whole will not change the entire 30000 would result in increasedoperating income for the companyIt is incorrect to multiply the 75000 increase in sales by Vancouvers 25 segment margin ratio This approach assumes that the segments traceable fixed expenses increase in proportion to sales but if they did they would not be fixedRequired 2 Refer to the original dataAssume that sales in Toronto increase by 50000 next year and that sales in Vancouver remain unchangedAssume no change in fixed costs a Prepare a new segmented income statement for the company using the above formatShow both amounts and percentages SegmentsTotal Company Toronto VancouverAmountAmountAmountSales 800000 1000 200000 100 600000 100 Variable 5253060 expenses42000060000360000 Contributionmargin 380000 475 140000 70 240000 40210 7800039 9000015 Traceable fixed expenses168000 Office segmentmargin 212000 2656200031 15000025 Common fixed expenses not traceable to segments120000150 Operatingincome92000115b Observe from the income statement you have prepared that the CM ratio for Toronto has remained unchanged at 70 the same as in the above data but that
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