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	$	2,170,000
Variable expenses		860,440
Contribution margin		1,309,560
Fixed expenses		1,339,000
Operating loss	$	(29,440	)

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
	South			Central			North
Sales	$	617,000		$	816,000		$	737,000
Variable expenses as a percentage of sales		52	%		30	%		40	%
Traceable fixed expenses	$	359,000		$	547,000		$	317,000

Required:

1.	Prepare a contribution format income statement segmented by geographic market, as requested by the president.

2-a.	The companys sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising is increased by $42,000. Calculate the incremental net operating income.

2-b.	Would you recommend the increased advertising?
	No Yes

Geographic Market Total Company South Central North Incremental net operating income