B7 AB D 1 2 Exercise 1 (10 marks) 3 3 Knar Ltd. sells sporting equipment in three store locations and has the following income statement: Sales Variable expenses Contribution margin Fixed expenses $ 1,500,000 882,000 618,000 650,000 -$ 32,000 Operating loss In an effort to isolate the problem, the president has asked for an income statement segmented by store. The Accounting Department has provided the following: Sales Variable expenses Traceable fixed expenses Store Locations Mississauga Brampton $ 500,000 $ 350,000 $ 350,000 S 206,000 $ 220,000 $ 130,000 Toronto $ 650,000 $ 326,000 $ 200,000 Required: 1. Prepare a contribution format income statement segmented by store location Store Locations Brampton Mississauga Total Company Toronto G Required: 1. Prepare a contribution format income statement segmented by store location Total Company Mississauga Store Locations Brampton Toronto Sales Variable expenses Contribution margin Segment margin Operating loss Which location appears to be the problem? 2. The company's sales manager believes that sales in the Brampton store could increase by 15% with a advertising increase of $20,000. Calculate the incremental net operating income for the company. 48.5% Incremental Sales Contribution Margin Ratio Incremental Contribution Margin Incremental Fixed Costs Incremental Operating Income Would you recommend the increased advertising? yes Instructions MC Exercise 1 Answer Sheet New