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 $ 1,649,000

Variable expenses 678,640

Contribution margin 970,360

Fixed expenses 1,067,000

Net operating income (loss) $ (96,640)

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:

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 10%. 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?

East $ 379,000 Division Central $670,000 Sales Variable expenses as a percentage of sales Traceable fixed expenses West $600,000 42% $197,000 $273,000 $326,000