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Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:
Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses $2,160,000 874,900 Contribution margin Fixed expenses 1,285,100 1,337,000 Operating loss S (51,900) 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: Geographic Market Sales Variable expenses as a percentage of sales Traceable fixed expenses South $ 616,000 55% $336,000 Central $815,000 30% $546,000 North $729,000 40% $316,000 Required: 1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. Geographic Market Total Company South Central North 2-a. The company's sales manager believes that sales in the Central geographic market could be increased by 10% if monthly advertising is increased by $41,000. Calculate the incremental net operating income. Incremental net operating income 2-b. Would you recommend the increased advertising? No O Yes
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