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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:

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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: Sales Variable expenses $2,030,000 822,250 Contribution margin Fixed expenses 1,207,750 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 Sales Variable expenses as a percentage of sales Traceable fixed expenses South $603,000 55% $323,000 Central $802,000 30% $533,000 North $625,000 40% $303,000 Required: 1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. Total Company South Geographic Market Central North 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. Incremental net operating income 2-b. Would you recommend the increased advertising? Yes O No

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