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

Sales$2,000,000

Variable expenses792,000

Contribution Margin1,208,000

Fixed Expenses1,305,000

Operating loss$(97,000)

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.

SouthCentralNorth

Sales $600,000$800,000$600,000

Variable exp (% of sales)52%30%40%

Traceable fixed expense$320,000$530,000$300,000

Required:

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

2. The company's sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising is increased by $25,000. Would you recommend the increased advertising? Show computations to support your answer.