Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,549,000 Variable expenses 624,600 Contribution margin 924,400 Fixed expenses 1,017,000 Net operating income (loss) $ (92,600) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 389,000 $ 640,000 $ 520,000 Variable expenses as a percentage of sales 60 % 27 % 42 % Traceable fixed expenses $ 254,000 $ 332,000 $ 193,000

Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $20,000 based on the belief that it would increase that division's sales by 12%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising?