Bovine Company, a wholesale distributor of DVDs, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement below:

Sales	$	1,586,000
Variable expenses		704,100
Contribution margin		881,900
Fixed expenses		970,000
Net operating loss	$	(88,100)

In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following data:

	Geographic Market
	South			Central			North
Sales	$	416,000		$	660,000		$	510,000
Variable expenses as a percentage of sales		60	%		31	%		49	%
Traceable fixed expenses	$	270,000		$	321,000		$	204,000

Required:

1.	Prepare a contribution format income statement segmented by geographic market, as desired by the president. (Input all amounts as positive values except losses which should be indicated by a minus sign.)

		Geographic Market
	Total Company	South	Central	North
(Click to select)Net operating income (loss)SalesContribution marginTraceable fixed expensesCommon fixed expenses not traceable to geographic marketsGeographic market segment marginVariable expenses	$	$	$	$
(Click to select)Contribution marginCommon fixed expenses not traceable to geographic marketsTraceable fixed expensesSalesGeographic market segment marginNet operating income (loss)Variable expenses
(Click to select)Gross marginContribution margin
(Click to select)Traceable fixed expensesCommon fixed expenses not traceable to geographic marketsVariable expensesNet operating income (loss)Geographic market segment marginContribution marginSales
(Click to select)Contribution marginGeographic market segment marginNet operating income (loss)SalesCommon fixed expenses not traceable to geographic marketsTraceable fixed expensesVariable expenses		$	$	$
(Click to select)Traceable fixed expensesGeographic market segment marginCommon fixed expenses not traceable to geographic marketsNet operating income (loss)Contribution marginSalesVariable expenses
(Click to select)Net operating lossNet operating income	$

2a.	The companys sales manager believes that sales in the Central geographic market could be increased by 14% if monthly advertising were increased by $20,000. Calculate the incremental net operating income.

Incremental net operating income

$

2b.

Would you recommend the increased advertising?

	No
	Yes