Reference no: EM132774169
Question - Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:
Sales $2,190,000
Variable expenses 887,520
Contribution margin 1,302,480
Fixed expenses 1,343,000
Operating loss $(40,520)
In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following:
Geographic Market South Central North
Sales $619,000 $818,000 $753,000
Variable expenses 50% 32% 42%
Traceable fixed expenses $350,000 $528,000 $319,000
Required -
1. Prepare contribution format income statement segmented by geographic market, as requested by the president.
2-a. The company's sales manager believes that sales in the Central geographic market could be increased by 10% if monthly advertising is increased by $44,000. Calculate the incremental net operating income.
2-b. Would you recommend the increased advertising?