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 $ 1,606,000 Variable expenses 614,420 Contribution margin 991,580 Fixed expenses 1,091,000 Net operating income (loss) $ (99,420) 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 $ 426,000 $ 650,000 $ 530,000 Variable expenses as a percentage of sales 57 % 27 % 37 % Traceable fixed expenses $ 264,000 $ 327,000 $ 207,000

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 $25,000 based on the belief that it would 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?