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	$	440,000		100.00	%		$	270,000		100	%		$	170,000		100	%
Variable costs		213,000		48.41				162,000		60				51,000		30
Contribution margin	$	227,000		51.59	%		$	108,000		40	%		$	119,000		70	%
Fixed costs traceable to divisions		138,300		31.43				56,700		21				81,600		48
Division responsibility margin	$	88,700		20.16	%		$	51,300		19	%		$	37,400		22	%
Common fixed costs		50,000		11.36
Income from operations	$	38,700		8.80	%

	Profit Centers
	Division 1						Product A						Product B
	Dollars			%			Dollars			%			Dollars			%
Sales	$	270,000		100	%		$	108,000		100.00	%		$	162,000		100.00	%
Variable costs		162,000		60				48,600		45.00				113,400		70.00
Contribution margin	$	108,000		40	%		$	59,400		55.00	%		$	48,600		30.00	%
Fixed costs traceable to products		37,800		14				11,340		10.50				26,460		16.33
Product responsibility margin	$	70,200		26	%		$	48,060		44.50	%		$	22,140		13.67	%
Common fixed costs		18,900		7
Responsibility margin for division	$	51,300		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 $190,000.