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 $ 1,629,000

Variable expenses 643,840

Contribution margin 985,160

Fixed expenses 1,084,000 Net operating income (loss) $ (98,840)

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 $ 389,000 $ 680,000 $ 560,000

Variable expenses as a percentage of sales 56% 33% 36%

Traceable fixed expenses $ 290,000 $ 328,000 $ 196,000

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 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?