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$1,630,000

Variable expenses606,500

Contribution margin1,023,500

Fixed expenses1,126,000

Net operating income (loss)$(102,500)

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 $440,000$690,000$500,000

Variable expenses as a percentage of sales60%25%34%

Traceable fixed expenses$287,000$323,000$192,000

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 $23,000 based on the belief that it would increase that division's sales by 19%. 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?