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 Variable expenses Fixed expenses Contribution margin Net operating income (loss) $ 1,580,000 596,200 983,800 1,082,000 $ (98,200) 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: Sales Variable expenses as a percentage of sales Traceable fixed expenses Required: East $380,000 Division Central $650,000 West $ 550,000 49% 25% 45% $ 278,000 $ 334,000 $ 198,000 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 $28,000 based on the belief that it would increase that division's sales by 11%. 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? Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (38,000 units x $43.10 per unit) Cost of goods sold (38,000 units x $22 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,637,800 836,000 801,800 475,000 $ 326,800 The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $22 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($216,000 +54,000 units) Absorption costing unit product cost Required: $11 3 4 4 $ 22 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above