DeLong Industrial Supply Company sells artistic supplies to retailers in three different states'North Carolina, South Carolina, and Georgia. The following profit analysis by state was prepared by the company:

The following fixed costs have also been provided:

In addition, assume that inventories have been negligible.
Management believes it could increase state sales by 25%, without increasing any of the fixed costs, by spending an additional $22,500 per state on advertising.
1. Prepare a contribution margin by state report for DeLong Industrial Supply Company.
2. Determine how much state operating profit will be generated for an additional $22,500 per state on advertising.
3. Which state will provide the greatest profit return for a $22,500 increase in advertising?Why?

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North Carolina Revenue Cost of goods solo Gross profit Selling expenses Income from operations 600,000 300,000 $300,000 195,000 $105,000 South Carolina $525,000 285,000 $240,000 180,000 60,000 Georgia $630,000 300,000 $330,000 225,000 $105,000 Fixed manufacturing costs Fixed selling expenses North Caolina South Carolina Georgia $67,500 60,600 60,000 45,000 $120,000 72,000