Q1

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 Variable expenses Contribution margin Fixed expenses Net operating income (loss) $1,553,000 553,290 999,710 1,100,000 (100,290) 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 Central $403,000 $600,000 $550,000 East West Sales Variable expenses as a percentage of sales Traceable fixed expenses 43% 23% 44% $288,000 $331,000 $199,000 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 16%. 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