6)

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	$ 1,605,000
Variable expenses	545,300
Contribution margin	1,059,700
Fixed expenses	1,166,000
Net operating income (loss)	$ (106,300)

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	$ 415,000	$ 650,000	$ 540,000
Variable expenses as a percentage of sales	48%	25%	34%
Traceable fixed expenses	$ 254,000	$ 326,000	$ 200,000

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 $23,000 based on the belief that it would increase that division's sales by 15%. 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?