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	$	400,000		100.00	%		$	250,000		100	%		$	150,000		100	%
Variable costs		195,000		48.75				150,000		60				45,000		30
Contribution margin	$	205,000		51.25	%		$	100,000		40	%		$	105,000		70	%
Fixed costs traceable to divisions		124,500		31.13				52,500		21				72,000		48
Division responsibility margin	$	80,500		20.13	%		$	47,500		19	%		$	33,000		22	%
Common fixed costs		40,000		10.00
Income from operations	$	40,500		10.13	%

	Profit Centers
	Division 1						Product A						Product B
	Dollars			%			Dollars			%			Dollars			%
Sales	$	250,000		100	%		$	100,000		100.00	%		$	150,000		100.00	%
Variable costs		150,000		60				45,000		45.00				105,000		70.00
Contribution margin	$	100,000		40	%		$	55,000		55.00	%		$	45,000		30.00	%
Fixed costs traceable to products		35,000		14				10,500		10.50				24,500		16.33
Product responsibility margin	$	65,000		26	%		$	44,500		44.50	%		$	20,500		13.67	%
Common fixed costs		17,500		7
Responsibility margin for division	$	47,500		19	%

Required:

a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $5,000 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 $170,000.