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 $ $2,030,000$

Variable expenses $822,250$

Contribution margin $1,207,750$

Fixed expenses $1,311,000$

Operating loss $ $(103,250)$

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 $ $603,000$ $ $802,000$ $ $625,000$

Variable expenses as a percentage of sales $55\%30\%40\%$

Traceable fixed expenses $ $323,000$ $ $533,000$ $ $303,000$

Required:

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

$2-$a$.$ The company$$s sales manager believes that sales in the Central geographic market could be increased by $12\%$ if monthly advertising is increased by $$28,000.$ Calculate the incremental net operating income.

$2-$b$.$ Would you recommend the increased advertising?

multiple choice

Yes

No