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

	Investment Centers
	Butterfield, Inc		Division 1		Division 2
	Dollars		%		Dollars		%		Dollars		%
Sales	$	450,000		100	%		$	300,000		100	%		$	150,000		100	%
Variable costs		225,000		50				180,000		60				45,000		30
Contribution margin	$	225,000		50	%		$	120,000		40	%		$	105,000		70	%
Fixed costs traceable to divisions		135,000		30				63,000		21				72,000		48
Division responsibility margin	$	90,000		20	%		$	57,000		19	%		$	33,000		22	%
Common fixed costs		45,000		10
Income from operations	$	45,000		10	%

	Profit Centers
	Division 1		Product A		Product B
	Dollars		%		Dollars		%		Dollars		%
Sales	$	300,000		100	%		$	100,000		100	%		$	200,000		100	%
Variable costs		180,000		60				52,000		52				128,000		64
Contribution margin	$	120,000		40	%		$	48,000		48	%		$	72,000		36	%
Fixed costs traceable to products		42,000		14				26,000		26				16,000		8
Product responsibility margin	$	78,000		26	%		$	22,000		22	%		$	56,000		28	%
Common fixed costs		21,000		7
Responsibility margin for division	$	57,000		19	%

Required:

a.The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $10,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 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.