Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown
Question:
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:
Sales | $ 1,590,000 |
Variable expenses | 701,000 |
Contribution margin | 889,000 |
Fixed expenses | 978,000 |
Net operating income (loss) | $ (89,000) |
In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:
| Division | |||
East | Central | West | ||
Sales | $ 380,000 | $ 660,000 | $ 550,000 | |
Variable expenses as a percentage of sales | 60% | 30% | 50% | |
Traceable fixed expenses | $ 265,000 | $ 339,000 | $ 198,000 |
Required:
1. Prepare a contribution format income statement segmented by divisions.
2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $26,000based on the belief that it would increase that division's sales by17%. 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?
Managerial Accounting
ISBN: 9781260247787
17th Edition
Authors: Ray Garrison And Eric Noreen And Peter Brewer