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Q1) Suppose that Dallas' sales by major market are given below:

    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%        

Company would like to initiate intensive advertising campaign in one of two markets in the next month. Campaign would cost $8000. Marketing studies point to that such a campaign would increase sales in construction market by $70,000 or increase sales in landscapign market by $60,000.

Required:

1. In which of the markets would you suggest that company focus its advertising campaign? Illustrate computations to support your answer.

2. Dallas shows $90,000 in traceable fixed expenses. What occured to $90,000 in this exercise?

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  • Category:- Accounting Basics
  • Reference No.:- M919746

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