Answer
1. The company focuses its advertising campaign on the Dental market.
2. The $48,000 in traceable fixed expenses in the previous exercise is now partly traceable and partly common.
Work Step by Step
1. The company focuses its advertising campaign on the Dental market.
2. The $48,000 in traceable fixed expenses in the previous exercise is now partly traceable and partly common. When we segment Minneapolis by market, only 33,000 remains a traceable fixed expense. This amount represents costs such as advertising and salaries of individuals that arise because of the existence of the Medical and Dental markets. The remaining 15,000 (8,000 – 33,000) is a common cost when Minneapolis is segmented by market. This amount would include costs such as the salary of the manager of the Minneapolis office that could not be avoided by eliminating either of the two market segments.
