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 $ 1,639,000

Variable expenses 646,720

Contribution margin 992,280

Fixed expenses 1,092,000

Net operating income (loss) $ (99,720)

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 $ 369,000 $ 700,000 $ 570,000

Variable expenses as a percentage of sales 48% 28% 48%

Traceable fixed expenses $ 294,000 $ 338,000 $ 191,000

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 $26,000 based on the belief that it would increase that division's sales by 15%. 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?