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

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Accounting

Wingate Company, a wholesale distributor of electronicequipment, has been experiencing losses for some time, as shown byits most recent monthly contribution format income statement:
Sales $ 1,552,000
Variable expenses 587,860
Contribution margin 964,140
Fixed expenses 1,061,000
Net operating income (loss) $ (96,860)
In an effort to resolve the problem, the company would like toprepare an income statement segmented by division. Accordingly, theAccounting Department has developed the following information:
Division
East Central West
Sales $ 362,000 $ 660,000 $ 530,000
Variable expenses as a percentage of sales 48 % 25 % 47 %
Traceable fixed expenses $ 250,000 $ 331,000 $ 203,000
Required:
1. Prepare a contribution format income statement segmented bydivisions.
2-a. The Marketing Department has proposed increasing the WestDivision's monthly advertising by $26,000 based on the belief thatit would increase that division's sales by 13%. Assuming theseestimates are accurate, how much would the company's net operatingincome increase (decrease) if the proposal is implemented?
2-b. Would you recommend the increased advertising?

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Requirement 1 Total East Central West Sales 1552000 362000 660000 530000 Variable expenses 587860 173760 165000 249100 Contribution margin 964140 188240 495000 280900 Traceable Fixed See Answer

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In: AccountingWingate Company, a wholesale distributor of electronicequipment, has been experiencing losses for some time, as...Wingate Company, a wholesale distributor of electronicequipment, has been experiencing losses for some time, as shown byits most recent monthly contribution format income statement:Sales$1,552,000Variable expenses587,860Contribution margin964,140Fixed expenses1,061,000Net operating income (loss)$(96,860)In an effort to resolve the problem, the company would like toprepare an income statement segmented by division. Accordingly, theAccounting Department has developed the following information:DivisionEastCentralWestSales$362,000$660,000$530,000Variable expenses as a percentage of sales48%25%47%Traceable fixed expenses$250,000$331,000$203,000Required:1. Prepare a contribution format income statement segmented bydivisions.2-a. The Marketing Department has proposed increasing the WestDivision's monthly advertising by $26,000 based on the belief thatit would increase that division's sales by 13%. Assuming theseestimates are accurate, how much would the company's net operatingincome increase (decrease) if the proposal is implemented?2-b. Would you recommend the increased advertising?


Sales	$	1,552,000
Variable expenses		587,860
Contribution margin		964,140
Fixed expenses		1,061,000
Net operating income (loss)	$	(96,860)

	Division
	East			Central			West
Sales	$	362,000		$	660,000		$	530,000
Variable expenses as a percentage of sales		48	%		25	%		47	%
Traceable fixed expenses	$	250,000		$	331,000		$	203,000