Exercise 1 (10 marks) - S Knar Lid sells sporting equipment in three store locations and has the following income statement 0 Sales Variable expenses Contribution margin Fixed expenses Operating loss $ 1.500.000 882.00 618.000 650.000 $ 32.000 In an effort to isolate the problem, the president has asked for an income statement segmented by store. The Accounting Department has provided the following: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 4 Sales Variable expenses Traceable fixed expenses Store Locations Mississauga Brampton $ 500,000 $ 350,000 $ 350,000 $ 206.000 $ 220,000 $ 130,000 Toronto $ 650.000 $ 326.000 $ 200,000 Required: 1. Prepare a contribution format income statement segmented by store location 5 Total Company Mississauga Store Locations Brampton Toronto Sales Variable expenses Contribution margin Instructions MC Exercise 1 Answer Sheet New.../ MacBook Ain 22 Required: 1. Prepare a contribution format income statement segmented by store location 26 27 Total Company Sales Variable expenses Contribution margin Mississauga Store Locations Brampton Toronto 20 30 31 Segment margin Operating loss Which location appears to be the problem? 34 35 36 37 8 2. The company's sales manager believes that sales in the Brampton store could increase by 15% with a advertising increase of $20,000. Calculate the incremental net operating income for the company. 48.5% Incremental Sales Contribution Margin Ratio Incremental Contribution Margin Incremental Fixed Costs Incremental Operating Income Would you recommend the increased advertising? yes