Assume Minneapolis's sales by major market are:
Sales
Variable expenses
Contribution margin
Traceable fixed expenses
Market segment margin
Common fixed expenses not traceable to
markets
Office segment margin
Minneapolis
Medical
Market
Dental
$ 342,000 100.00% $ 228,000 100.00% $ 114,000 100.00%
205,200
60.00%
145,920
64.00%
59,280
52.00%
136,800
40.00%
82,080
36.00%
54,720
48.00%
37,620
11.00%
13,680
6.00%
23,940
21.00%
99,180
29.00%
$ 68,400
30.00%
$ 30,780 27.00%
17,100
5.00%
$ 82,080 24.00%
The company is planning a $5,700 advertising campaign next month in either the Medical or Dental market. Marketing
studies indicate this campaign would increase Medical market sales by $45,600 or Dental market sales by $39,900.
Required:
1. How much would the company's profits increase (decrease) if it advertised in the Medical market?
2. How much would the company's profits increase (decrease) if it advertised in the Dental market?
3. Should the company advertise in the Medical or Dental market?