Question

Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000
Variable expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792,000
Contribution margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,208,000
Fixed expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,305,000
Operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (97,000)
In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following:
Required:
1. Prepare a contribution format income statement segmented by geographic market, as requested by the president.
2. The company’s sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising is increased by $25,000. Would you recommend the increased advertising? Show computations to support your answer.


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  • CreatedJuly 08, 2015
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