Assume that Dallas' sales by major market are as follows:
|
|
|
Market
|
|
|
Dallas
|
Construction Clients
|
Landscaping Clients
|
|
Sales.....
|
$600,000
|
100.0%
|
$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
|
|
Office 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 $8000. Marketing studies indicate that such a campaign would increase sales in the construction market by $70,000 or increase sales in the landscapign market by $60,000.
Required:
1. In which of the markets would you recommend that the company focus its advertising campaign? Show computations to support your answer.
2. In Exercise 12-11, Dallas shows $90,000 in traceable fixed expenses. What happened to the $90,000 in this exercise?