Exercise 6-11 (Algo) Segmented Income Statement (L06-4) 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 $1,653,000 Variable expenses 649, 150 Contribution margin 1,003,850 Fixed expenses 1,104,000 Het operating Income (less) 5 (100,150) 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 5.383.000 $ 690,000 $ 580,000 Variable expenses percentage of sales 45% SON 37 Traceabile fixed expenses $ 200,000 5.333,000 $ 201,000 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 $24,000 based on the belief that it would increase that division's sales by 10% Assuming these estimates are accurate how much would the company's net operating income increase (decrease the proposal is implemented? 2-5 Would you recommend the increased advertising Chapter 6 Homework Love 5 07 12 pon Tami Tyler opened Tame's Creations, Inc., a small manufacturing company, at the beginning of the year Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler's personal finances. The following income statement for the first quartet was prepared by a friend who has just completed a course in managerial accounting at State University The Creations, Inc Income Statement For the water Ended March 31 Sales (20,500 units) 1,140.000 Variable expenses Variable cost of goods sold $441,750 Variable selling and dinistrative 185,250 627,08 Contribution margin 510.000 Fixed expenses Fixed facturing overhead 203,500 Fixed selling and administrative 243, 326.500 Net operating loss $ 3.500) BO References Ms. Tyler is discouraged over the loss own for the quarter particularly because she had planned to use the statement as support for a bank loan Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter At this point, Ms. Tyler is manufacturing only one product--a swimsuit Production and cost data relating to the swimsuit for the first quarter follow $1,500 20.500 its produced Units sold Variable coste per unit Direct waterials Direct labor Variwanufacturing overhead Variot selling and administrative 17.30 . 5 1.9 6.50 $441,750 185,250 623.000 513,000 Sales (28.500 units) Variable expenses: Variable cost of soods sold Variable selling and administrative Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative Net operating loss 283,500 243,000 526 500 $ 13,500) Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter At this point, Ms Tyler is manufacturing only one product-a swimsuit Production and cost data relating to the swimsuit for the first quarter follow 31,50 20.500 Units produced Units sold Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and admistrative 5.10 56.40 3280 10.50 Required: 1. Complete the following a. Compute the unit product cost under absorption costing b. What is the company's absorption costing net operating income (los) for the quarter? c Reconcile the variable and absorption conting net operating income closs) figures a. During the second quarter of operations, the company again produced 31500 units but sold 34,500 units. (Assume no change in total fixed costs) What is the company's variable costing net operating income fossi for the second quarter? b. What is the company's absorption costing operating income loss for the second quarter? c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter