Exercise 6-11 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, which follows:

Sales	$	1,632,000
Variable expenses		636,400
Contribution margin		995,600
Fixed expenses		1,095,000
Net operating income (loss)	$	(99,400)

In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

	Division
	East			Central			West
Sales	$	402,000		$	700,000		$	530,000
Variable expenses as a percentage of sales		45	%		31	%		45	%
Traceable fixed expenses	$	273,000		$	322,000		$	209,000

1.	Prepare a contribution format income statement segmented by divisions, as desired by the president.

2-a.	As a result of a marketing study, the president believes that sales in the West Division could be increased by 15% if monthly advertising in that division were increased by $23,000. Calculate the incremental net operating income.