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.
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Assume that Dallas' sales by major market are as follows:
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Market
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Dallas
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Construction
Clients
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Landscaping
Clients
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Sales
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$
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600,000
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100
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%
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$
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400,000
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100
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%
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$
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200,000
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100
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%
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Variable expenses
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360,000
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60
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260,000
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65
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100,000
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50
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Contribution margin
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240,000
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40
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140,000
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35
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100,000
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50
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Traceable fixed expenses
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72,000
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12
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20,000
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5
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52,000
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26
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Market segment margin
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168,000
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28
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$
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120,000
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30
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%
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$
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48,000
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24
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%
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Common fixed expenses not
traceable to markets
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18,000
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3
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Office segment margin
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$
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150,000
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25
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%
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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 $60,000.
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1a.
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Calculate the increased segment margin. (Omit the "$" sign in your response.)
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Construction
Clients
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Landscaping
Clients
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Increased segment margin
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$
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$
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