Required informationExercise 7-16 Working with a Segmented Income Statement; Break-Even Analysis [LO7-4, LO7-5][The following information applies to the questions displayed below.] Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given: Office Total Company Chicago MinneapolisSales$712,500 100.0% $142,500 100% $570,000 100%Variable expenses 384,750 54.0% 42,750 30% 342,000 60%Contribution margin 327,750 46.0% 99,750 70% 228,000 40%Traceable fixed expenses 159,600 22.4% 74,100 52% 85,500 15%Office segment margin 168,150 23.6% $25,650 18% $142,500 25%Common fixed expenses not traceable to offices 114,000 16.0% Net operating income$54,150 7.6% Exercise 7-16 Part 22. By how much would the company’s net operating income increase if Minneapolis increased its sales by $71,250 per year? Assume no change in cost behavior patterns.

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of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.