Shown as follows are responsibility income statements for Butterfield, Inc., for the month of March.

Investment CentersButterfield, IncDivision 1Division 2Dollars%Dollars%Dollars%Sales$520,000100.00%$340,000100%$180,000100%Variable costs258,00049.62204,0006054,00030Contribution margin$262,00050.38%$136,00040%$126,00070%Fixed costs traceable to divisions157,80030.3571,4002186,40048Division responsibility margin$104,20020.04%$64,60019%$39,60022%Common fixed costs50,0009.62Income from operations$54,20010.42%

Profit CentersDivision 1Product AProduct BDollars%Dollars%Dollars%Sales$340,000100%$136,000100.00%$204,000100.00%Variable costs204,0006061,20045.00142,80070.00Contribution margin$136,00040%$74,80055.00%$61,20030.00%Fixed costs traceable to products47,6001414,28010.5033,32016.33Product responsibility margin$88,40026%$60,52044.50%$27,88013.67%Common fixed costs23,8007Responsibility margin for division$64,60019%

Required:

a.The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $4,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised.

e.Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $200,000.