Reference no: EM131692882

Exercise - Segmented Income Statement

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	$1,610,000
Variable expenses	724,900
Contribution margin	885,100
Fixed expenses	974,000
Net operating income (loss)	$(88,9000)

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	$370,000	$650,000	$590,000
Variable expenses as a percentage of sales	59%	38%	44%
Traceable fixed expenses	$257,000	$327,000	$208,000

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 $21,000 based On the belief that it would increase that division's sates by 14%. 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?