Exercise 6-11 (Algo) Segmented Income Statement [LO6-4]

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	$ 1,672,000
Variable expenses	519,840
Contribution margin	1,152,160
Fixed expenses	1,267,000
Net operating income (loss)	$ (114,840)

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	$ 422,000	$ 660,000	$ 590,000
Variable expenses as a percentage of sales	47%	21%	31%
Traceable fixed expenses	$ 282,000	$ 328,000	$ 202,000

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 $27,000 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?