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 $ 1,542,000 Variable expenses 631,860 Contribution margin 910,140 Fixed expenses 1,001,000 Net operating income (loss) $ (90,860 ) 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 $ 362,000 $ 650,000 $ 530,000 Variable expenses as a percentage of sales 53 % 31 % 45 % Traceable fixed expenses $ 277,000 $ 334,000 $ 204,000 Required:

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

2-a. As a result of a marketing study, the president believes that sales in the West Division could be increased by 15% if monthly advertising in that division were increased by $22,000. Calculate the incremental net operating income. 2-b. Would you recommend the increased advertising? No Yes