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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 $ 1,587,000
Variable expenses 616,650
Contribution margin 970,350
Fixed expenses 1,067,000
Net operating income (loss) $ (96,650)

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 $ 387,000 $ 690,000 $ 510,000
Variable expenses as a percentage of sales 55% 26% 44%
Traceable fixed expenses $ 275,000 $ 327,000 $ 204,000

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 $25,000 based on the belief that it would increase that division's sales by 14%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?

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