cost and management accounting

Part Two: Segmented Income Statement Exercise (13 marks 7 + 6) Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time as shown by its most recent montly contribution format income statement Sales 2,000,000 Variable Expenses ..."; 792,000 Contribution margin 1,208,000 Fixed Expenses 1,305,000 Operating loss $ 97,000 In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly the Accounting Dept has developed the following: Geographic Market South Central North Sales .... 600,000 800,000 600,000 Variable expenses as % of sales 52% 30% 10% Traceable fixed expenses .........$ 320,000 530,000 300,000 Required: 1) Prepare a contribution format income statement segmented by geographic market, as suggested by the president 2) The Company's sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising is increased by $25,000. Would you recommend the increased advertising? Show computations to suport your answer 1 ) Total Geographic Market Company South Central North Sales Less: Variable Expense Contribution Margin Fixed Expense Segment Margin Common Fixed Expense Operating Income Incremental Sales Contribution Margin Incremental Contribution Margin less: Incremental Ad cost Incremental Operating Income