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	$ 1,634,000
Variable expenses	672,620
Contribution margin	961,380
Fixed expenses	1,058,000
Net operating income (loss)	$ (96,620)

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	$ 434,000	$ 660,000	$ 540,000
Variable expenses as a percentage of sales	43%	36%	46%
Traceable fixed expenses	$ 275,000	$ 322,000	$ 193,000

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 $20,000 based on the belief that it would increase that division's sales by 14%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?