Muscle Bound Co. sells home exercise equipment. The company hastwo sales territories, Eastern and Western. Two products are soldin each territory: FasTrak (a Nordic ski simulator) and RowMaster(a stationary rowing machine).

  

During January, the following data are reported for the Easternterritory.

	FasTrak				RowMaster
Sales	$	600,000			$	750,000
Contribution margin ratios		55	%			40	%
Traceable fixed costs	$	80,000			$	150,000

Common fixed costs in the Eastern territory amounted to $120,000during the month.

During January, the Western territory reported total sales of$600,000, variable costs of $270,000, and a responsibility marginof $200,000. Muscle Bound also incurred $180,000 of common fixedcosts that were not traceable to either sales territory.

In addition to being profit centers, each territory is alsoevaluated as an investment center. Average assets utilized by theEastern and Western territories amount to $14,000,000 and$12,000,000, respectively.

Required:

a. Prepare the January income statement for theEastern territory by product line.

b. Prepare the January income statement for thecompany showing profits by sales territories. Conclude yourstatement with income from operations for the company and withresponsibility margins for the two territories.

c. Compute the rate of return on average assetsearned in each sales territory during the month of January.

e-1. The manager of the Eastern territory isauthorized to spend an additional $50,000 per month to advertiseone of the products. Based on past experience, the managerestimates that additional advertising will increase the sales ofeither product by $120,000?

e-2. On which product should the manager focusthis advertising campaign?