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	$	470,000		100.00	%		$	290,000		100	%		$	180,000		100	%
Variable costs		228,000		48.51				174,000		60				54,000		30
Contribution margin	$	242,000		51.49	%		$	116,000		40	%		$	126,000		70	%
Fixed costs traceable to divisions		147,300		31.34				60,900		21				86,400		48
Division responsibility margin	$	94,700		20.15	%		$	55,100		19	%		$	39,600		22	%
Common fixed costs		50,000		10.64
Income from operations	$	44,700		9.51	%

	Profit Centers
	Division 1						Product A						Product B
	Dollars			%			Dollars			%			Dollars			%
Sales	$	290,000		100	%		$	116,000		100.00	%		$	174,000		100.00	%
Variable costs		174,000		60				52,200		45.00				121,800		70.00
Contribution margin	$	116,000		40	%		$	63,800		55.00	%		$	52,200		30.00	%
Fixed costs traceable to products		40,600		14				12,180		10.50				28,420		16.33
Product responsibility margin	$	75,400		26	%		$	51,620		44.50	%		$	23,780		13.67	%
Common fixed costs		20,300		7
Responsibility margin for division	$	55,100		19	%

Required:

a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $3,000 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.