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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: $2,120,000 915,740 Sales Variable expenses Contribution margin Fixed expenses 1,204,260 1,329,000 $ (124,740) Operating loss 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 $612,000 North $697,000 Central $811.000 357 $501,000 Sales Variable expenses as a percentage of sales Teaceable fixed expenses $321,000 Required: 1. Prepare a contribution format Income statement segmented by geographic market, as requested by the president. Geographic Market $ $ Total Company $ 2.120.000 915,740 $ 1.204,260 1.134.000 $ 70260 195.000 IS (124.740) South 812.000 3 3 18.240 2 93,760 3 21.000 (27.240) $ Central 811,000 2 63.850 527.150 601,000 26,150 North 897.000 313.650 383, 350 312.000 71.350 Sales Variable expenses Contribution margin Traceable faced expenses Geographic market segment margin Common foued expenses not traceable lo geographic markets Operating income $ $ Required: 1. Prepare a contribution format Income statement segmented by geographic market, as requested by the president Geographic Market North $ $ Sales Vanable expenses Contribution margin Traceable fixed expenses Geographic market segment margin Common fixed expenses not traceable to geographic markets Operating income Total Company $ 2,120,000 915,740 $ 1,204,260 1,134,000 $ 70,260 195,000 $ (124,740) South Central 612,000 $ 811,000 318,240 2 83,850 293,760 527,150 321,000 501,000 27.240) $ 26,150 697,000 313,650 383,350 312,000 71,350 $ $ 2-a. The company's sales manager believes that sales in the Central geographic market could be increased by 14% If monthly advertising is increased by $37,000. 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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