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 $ 1,621,000

Variable expenses 581,660

Contribution margin 1,039,340

Fixed expenses 1,143,000

Net operating income (loss) $ (103,660)

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 $ 401,000 $ 700,000 $ 520,000

Variable expenses as a percentage of sales 46 % 30 % 36 %

Traceable fixed expenses $ 254,000 $ 325,000 $ 206,000

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 $30,000 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?