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 $ 1,687,000 Variable expenses 602,830 Contribution margin 1,084,170 Fixed expenses 1,193,000 Net operating income (loss) $ (108,830) 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 $ 447,000 $ 660,000 $ 580,000 Variable expenses as a percentage of sales 49 % 23 % 40 % Traceable fixed expenses $ 282,000 $ 336,000 $ 198,000 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 $28,000 based on the belief that it would increase that division's sales by 17%. 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?

Prepare a contribution format income statement segmented by divisions.

	Division Total Company East Central West

The Marketing Department has proposed increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 17%. 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

Would you recommend the increased advertising?

	Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2

Answer 1