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Income Statement [LO6-4]

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	$ 1,544,000
Variable expenses	592,080
Contribution margin	951,920
Fixed expenses	1,047,000
Net operating income (loss)	$ (95,080)

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	$ 424,000	$ 610,000	$ 510,000
Variable expenses as a percentage of sales	57%	24%	40%
Traceable fixed expenses	$ 282,000	$ 335,000	$ 209,000

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 $26,000 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?

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