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 Contribution margin Fixed expenses Operating loss $2,070,000 895,880 1,174,120 1,319,000 $ (144,880) 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 South $607,000 Central $806,000 North $657,000 Variable expenses as a percentage of sales Traceable fixed expenses 50% 36% 46% $320,000 $480,000 $307,000 Required: 1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. Geographic Market Total Company South Central North Sales $ 2,070,000 $ 607,000 $ 806,000 $ 657,000 Variable expenses 895,880 303,500 290,160 302,220 Contribution margin $ 1,174,120 303,500 515,840 354,780 Traceable fixed expenses 1,319,000 320,000 480,000 307,000 $ (144,880) $ (16,500) $ 35,840 $ 47,780 $ (144,880) 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 $32,000. Calculate the incremental net operating income. Incremental net operating income 2-b. Would you recommend the increased advertising? Yes