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$ 1,604,000Variable expenses668,000Contribution margin936,000Fixed expenses1,030,000Net operating income (loss)$ (94,000)

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:

DivisionEastCentralWest Sales$ 424,000$ 660,000$ 520,000 Variable expenses as a percentage of sales60%28%44% Traceable fixed expenses$ 256,000$ 321,000$ 195,000

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 $27,000 based on the belief that it would increase that division's sales by 13%. 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?