Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement:

Sales	$ 1,577,000
Variable expenses	565,130
Contribution margin	1,011,870
Fixed expenses	1,113,000
Net operating income (loss)	$ (101,130)

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	$ 397,000	$ 650,000	$ 530,000
Variable expenses as a percentage of sales	59%	24%	33%
Traceable fixed expenses	$ 260,000	$ 323,000	$ 202,000

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 $29,000 will increase that division's sales by 16%. 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?

Prepare a contribution format income statement segmented by divisions.

		Division
Total Company	East	Central	West
	0	0	0	0
	0	$0	$0	$0
	$0

• The Marketing Department believes increasing the West Division's monthly advertising by $29,000 will increase that division's sales by 16%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?
• Note: Do not round intermediate calculations.
• Show less

Net operating income will

by

Would you recommend the increased advertising?

• Yes
• No

Exercise 6-9 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2, LO6-3]

Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$ 29
Direct labor	$ 16
Variable manufacturing overhead	$ 4
Variable selling and administrative	$ 3
Fixed costs per year:
Fixed manufacturing overhead	$ 320,000
Fixed selling and administrative expenses	$ 60,000

During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company's product is $57 per unit.

Required:

1. Assume the company uses variable costing:
   1. Compute the unit product cost for Year 1 and Year 2.
   2. Prepare an income statement for Year 1 and Year 2.
2. Assume the company uses absorption costing:
   1. Compute the unit product cost for Year 1 and Year 2.
   2. Prepare an income statement for Year 1 and Year 2.
3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.
4. Assume the company uses variable costing. Compute the unit product cost for year 1 and year 2.

	Year 1	Year 2
Unit product cost

Assume the company uses variable costing.Prepare an income statement for Year 1 and Year 2.

Walsh Company
Income Statement
	Year 1	Year 2
Net operating income (loss)

Assume the company uses absorption costing. Compute the unit product cost for Year 1 and Year 2.

Note: Round your answer to 2 decimal places.

	Year 1	Year 2
Unit product cost

Assume the company uses absorption costing. Prepare an income statement for Year 1 and Year 2.

Note: Round your intermediate calculations to 2 decimal places.

Walsh Company
Income Statement
	Year 1	Year 2
Net operating income (loss)

Assume the company uses absorption costing. Prepare an income statement for Year 1 and Year 2.

Note: Round your intermediate calculations to 2 decimal places.

Walsh Company
Income Statement
	Year 1	Year 2
Net operating income (loss)

•