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: |
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|
|
|
|
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 |
|
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|
|
| Contribution margin |
|
240,000 |
40 |
|
|
140,000 |
35 |
|
|
100,000 |
50 |
|
| Traceable fixed expenses |
|
72,000 |
12 |
|
|
20,000 |
5 |
|
|
52,000 |
26 |
|
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|
|
| Market segment margin |
|
168,000 |
28 |
|
$ |
120,000 |
30 |
% |
$ |
48,000 |
24 |
% |
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|
Common fixed expenses not
Traceable to markets |
|
18,000 |
3 |
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| Office segment margin |
$ |
150,000 |
25 |
% |
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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 $60,000.
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| 1a. |
Calculate the increased segment margin. (Omit the "$" sign in your response.)
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