Part A

Deacon Company's contribution format income statement for June is presented as follows.

Deacon Company

Income statement

For the month ended June $30$

Sales

Less: Variable expenses

Contribution margin

Less: Fixed expenses

$$1,500,000$

$672\mathrm{.}000$

$828,000$

$756,000$

$$72,000$

Net operating income

Deacon Company is divided into two segments: Northern and Western. For the month ended June $30,$ the Northern segment recorded $$600,000$ in sales and $$312,000$ in variable expenses. The remaining sales and variable expenses were recorded in the Western segment. Cost records show that $$240,000$ of fixed expenses were traceable to the Northern segment and $$216,000$ to the Western segment, with the remaining common to the two segments.

Required:

$($a$)$ Prepare the contribution format segmented income statements showing the total company broken down between the Northern and Western segments.

$($b$)$

$(5$ marks$)$

Deacon company is considering to launch an advertising campaign in one of the two segments. The management estimates that the campaign would cost $$20,000.$ If the campaign is launched in the Northern segment, it would increase the segment's sales by $$80,000.$ If the campaign is launched in the Western segment, its segment's sales would be increased by $$70,000.$

$(1)$

How much would the company's total profit increase $($or decrease$)$ if the advertising campaign is launched in the Northern segment?

$(4$ marks$)$

$(2)$

How much would the company's total profit increase $($or decrease$)$ if the advertising campaign is launched in the Western segment?

$(4$ marks$)$

$(3)$

Based on your analysis in $(1)$ and $(2),$ which segment would be chosen for launching the advertising campaign? Explain the reason.