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Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time,...

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Accounting

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 $ 1,636,000
Variable expenses 671,880
Contribution margin 964,120
Fixed expenses 1,061,000
Net operating income (loss) $ (96,880)
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 $ 376,000 $ 700,000 $ 560,000
Variable expenses as a percentage of sales 48%39%39%
Traceable fixed expenses $ 286,000 $ 338,000 $ 191,000
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 19%. 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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