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

Sales $ $1,656,000$

Variable expenses $682,200$

Contribution margin $973,800$

Fixed expenses $1,071,000$

Net operating income $($loss$)$ $ $(97,200)$

In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information:

Division

East Central West

Sales $ $406,000$ $ $670,000$ $ $580,000$

Variable expenses as a percentage of sales $45\%33\%48\%$

Traceable fixed expenses $ $254,000$ $ $329,000$ $ $205,000$

Required:

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

$2-$a$.$ The Marketing Department believes increasing the West Division's monthly advertising by $$24,000$ will increase that division's sales by $19\%.$ 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?

Answer rating: 100% (QA)

contribution Format Income Statement Segmented by Divisions East Central West Total Sales 406000 670... View the full answer