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

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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$1,606,000
Variable expenses659,440
Contribution margin946,560
Fixed expenses1,041,000
Net operating income (loss)$(94,440)

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

EastCentralWest
Sales$376,000$660,000$570,000
Variable expenses as a percentage of sales49%34%44%
Traceable fixed expenses$281,000$336,000$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 $25,000 based on the belief thatit would increase that division's sales by 11%. 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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