Question
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
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 | $ 1,544,000 |
|---|---|
| Variable expenses | 592,080 |
| Contribution margin | 951,920 |
| Fixed expenses | 1,047,000 |
| Net operating income (loss) | $ (95,080) |
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 | $ 424,000 | $ 610,000 | $ 510,000 |
| Variable expenses as a percentage of sales | 57% | 24% | 40% |
| Traceable fixed expenses | $ 282,000 | $ 335,000 | $ 209,000 |
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 $26,000 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?
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Intermediate Accounting principles and analysis
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
2nd Edition
471737933, 978-0471737933
