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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 $2,130,000 911,170 Contribution margin Fixed expenses 1,218,830 1,331,000 Operating loss $ (112,170) 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 $ 613,000 53% $333,000 Central $812,000 34% $502,000 North $705,000 44% $ 313,000 1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. Total Company Geographic Market Central South North $ 0 0 0 Sales Variable expenses Contribution margin Traceable fixed expenses Geographic market segment margin Common fixed expenses not traceable to products 0 $ 0 $ 0 $ $ 0 2-a. The company's sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising is increased by $38,000. Calculate the incremental net operating income. Incremental net operating income 2-b. Would you recommend the increased advertising
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