Wingate Company, a wholesale distributor of videotapes, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement, which follows:

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:

Required:

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

2.         As a result of a marketing study, the president believes that sales in the West Division could be increased by 20% if monthly advertising in that division were increased by $15,000. Would you recommend the increased advertising? Show computations to support your answer.

Transcribed Image Text:

Sales .. S1,000,000 Variable expenses 390,000 Contribution margin Fixed expenses 610,000 625,000 $ (15,000) Net operation income (loss)