Required information [The following information applies to the questions displayed below.) Diego Company manufactures one product that is sold for $72 per unit in two geographic regions--the East and West regions. The following information pertains to the company's first year of operations in which it produced 55,000 units and sold 50,000 units. Variable costs per unit: Manufacturing: Direct materials $ 23 Direct labor $ 14 Variable manufacturing $ 3 overhead Variable selling and $ 5 administrative Fixed costs per year: Fixed manufacturing overhead $770,000 Fixed selling and administrative expense $607,000 The company sold 37,000 units in the East region and 13,000 units in the West region. It determined that $290,000 of its fixed selling and administrative expense is traceable to the West region, $240,000 is traceable to the East region, and the remaining $77,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 7. What is the amount of the difference between the variable costing and absorption costing net operating incomes (losses)? Difference of Variable Costing and Absorption Costing Net Operating Income (Losses) Variable costing net operating income (loss) (27,000 Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing 43,000 Absorption costing net operating income (loss) $ 70,000) 13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions. Income Statement Total East West Company $ $ Sales $ 936,000 3,600,000 2,664,000 Variable expenses 2,250,000 1,665,000 585,000 Contribution margin 1,350,000 999,000 351,000 Traceable fixed expenses 1,300,000 X 809,800x490,200 Traceable fixed expenses X 50,000 $ 189,200 139,200) Common fixed expenses not 77,000% traceable to regions Net operating loss $ (27,000) *Red text indicates no response was expected in a cell or a formula-based 14. Diego is considering eliminating the West region because an internally generated report suggests the region's total gross margin in the first year of operations was $56,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2. what would be the profit impact of dropping the West region in Year 2? Profit will decrease by 72,200 15. Assume the West region invests $45,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign? Profit will increase by 142,2008