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ch 6 exer 7

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	$	1,618,000
Variable expenses		696,180
Contribution margin		921,820
Fixed expenses		1,014,000
Net operating income (loss)	$	(92,180)

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	$	408,000		$	620,000		$	590,000
Variable expenses as a percentage of sales		51	%		34	%		47	%
Traceable fixed expenses	$	251,000		$	321,000		$	201,000

Required:

a.	Prepare a contribution format income statement segmented by divisions, as desired by the president.
	Division Total Company East Central West

b

As a result of a marketing study, the president believes that sales in the West Division could be increased by 19% if monthly advertising in that division were increased by $25,000. Calculate the incremental net operating income.

	Incremental net operating income

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