1)

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	$1,550,000
Variable Expenses	560,700
Contribution Margin	989,300
Fixed Expenses	1,088,000
Net Operating Income	(98,700)

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:

	East	Central	West
Sales	$370,000	$610,000	$570,000
Variable expenses as a % of sales	53%	28%	34%
Traceable fixed expenses	$297,000	$330,000	$192,000

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 $25,000 based on the belief that it would increase that division's sales by 13%. 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?