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	$	2,080,000
Variable expenses		878,020
Contribution margin		1,201,980
Fixed expenses		1,321,000
Operating loss	$	(119,020	)

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	$	608,000		$	807,000		$	665,000
Variable expenses as a percentage of sales		56	%		32	%		42	%
Traceable fixed expenses	$	328,000		$	538,000		$	308,000

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

2-a. The companys sales manager believes that sales in the Central geographic market could be increased by 10% if monthly advertising is increased by $33,000. Calculate the incremental net operating income.

2-b. Would you recommend the increased advertising?

• No

• Yes