Question

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:

Sales	$	1,618,000
Variable expenses		546,900
Contribution margin		1,071,100
Fixed expenses		1,178,000
Net operating income (loss)	$	(106,900)

In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

	Division
	East			Central			West
Sales	$	418,000		$	700,000		$	500,000
Variable expenses as a percentage of sales		55	%		21	%		34	%
Traceable fixed expenses	$	257,000		$	333,000		$	210,000

Required:

1. Prepare a contribution format income statement segmented by divisions.

2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $24,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?

2-b. Would you recommend the increased advertising?

1.

	Division Total Company East Central West Sales Variable expenses Contribution loss 0 0 0 0 Fixed manufacturing overhead 0 $0 $0 $0 $0

2.

The Marketing Department has proposed increasing the West Division's monthly advertising by $24,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? (Do not round intermediate calculations.)

	Net operating income will by

3.

Would you recommend the increased advertising?

	Yes No

Answer 1

Please provide rating..

answer 1-	contribution wise income statement at division
		Division
		Total	East	Central	West
	Sales	1,618,000	418,000	700,000	500,000
	Variable cost (base on given %)	546,900	229900	147000	170000
	Contribution margin	1,071,100	188,100	553,000	330,000
	Traceable fixed cost	800,000	257,000	333,000	210,000
	Division margin	271,100	-68,900	220,000	120,000
	other common expenses	378,000
	Net operating profit	-106,900
answer 2-a
		Division
		Total	East	Central	West
	Sales	1,693,000	418,000	700,000	575,000	=500000*115%
	Variable cost	572,400	229900	147000	195500
	Contribution margin	1,120,600	188,100	553,000	379,500	=24000+330000
	Traceable fixed cost	824,000	257,000	333,000	234,000
	Division margin	296,600	-68,900	220,000	145,500
	other common expenses	378,000
	Net operating profit	-81,400
	therefore income will improve by =	25,500
answer 3	Yes we recommend for advertisement