Question
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales $
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales $ 1,590,000 Variable expenses 592,200 Contribution margin 997,800 Fixed expenses 1,098,000 Net operating income (loss) $ (100,200) In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Division East Central West Sales $ 380,000 $ 640,000 $ 570,000 Variable expenses as a percentage of sales 53% 29% 36% Traceable fixed expenses $ 298,000 $ 323,000 $ 207,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $25,000 will increase that division's sales by 17%. 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?
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