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, which follows:

Sales	$	1,623,000
Variable expenses		677,250
Contribution margin		945,750
Fixed expenses		1,040,000
Net operating income (loss)	$	(94,250)

In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

	Division
	East			Central			West
Sales	$	393,000		$	630,000		$	600,000
Variable expenses as a percentage of sales		55	%		37	%		38	%
Traceable fixed expenses	$	274,000		$	320,000		$	194,000

1.

Prepare a contribution format income statement segmented by divisions, as desired by the president.

		Division
	Total Company	East	Central	West

2a.	As a result of a marketing study, the president believes that sales in the West Division could be increased by 11% if monthly advertising in that division were increased by $21,000. Calculate the incremental net operating income.

Incremental net operating income

2-b.

Would you recommend the increased advertising?

	Yes
	No