Exercise 4-11 (Algo) Segmented Income Statement [LO4-4]

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:

Sales	$ 1,649,000
Variable expenses	717,130
Contribution margin	931,870
Fixed expenses	1,025,000
Net operating income (loss)	$ (93,130)

In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

	Division
East	Central	West
Sales	$ 379,000	$ 690,000	$ 580,000
Variable expenses as a percentage of sales	57%	39%	40%
Traceable fixed expenses	$ 286,000	$ 337,000	$ 191,000

Required:

1. Prepare a contribution format income statement segmented by divisions.

2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 13%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?

2-b. Would you recommend the increased advertising?