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	$	2,060,000
Variable expenses		874,380
Contribution margin		1,185,620
Fixed expenses		1,317,000
Operating loss	$	(131,380	)

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	$	606,000		$	805,000		$	649,000
Variable expenses as a percentage of sales		52	%		34	%		44	%
Traceable fixed expenses	$	306,000		$	500,000		$	306,000

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 15% if monthly advertising is increased by $31,000. Calculate the incremental net operating income.

2-b.

Would you recommend the increased advertising?

	No
	Yes