Question
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format
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 Contribution margin Fixed expenses Net operating income (loss) $ 1,726,000 657,700 1,068,300 1,175,000 $ (106,700) 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: East Sales $ 436,000 Division Central $ 690,000 West $ 600,000 Variable expenses as a percentage of sales Traceable fixed expenses 55% 31% 34% $ 279,000 $ 321,000 $ 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 $20,000 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? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Prepare a contribution format income statement segmented by divisions. Division Total Company East Central West 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0
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