Prepare a contribution format income statement

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Reference no: EM13170340

Wingate Company, a wholesale distributer of videotapes, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement, which follows:

Sales

$1,000,000

Variable expenses

390,000

Contribution margin

610,000

Fixed expenses

625,000

Net operating income (loss)

$ (15,000)

In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

                                                                                          Division

East                      Central                         West      

Sales

$250,000

$400,000

$350,000

Variable expenses as a percentage of sales

52%

30%

40%

Traceable fixed expenses

$160,000

$200,000

$175,000

1) Prepare a contribution format income statement segmented by divisions, as desired by the president.

2) As a result of a marketing study, the president believes that sales in the West Division could be increased by 20% if monthly advertising in that division were increased by $15,000. Would you recommend the increased advertising? Show computations to support your answer.

Reference no: EM13170340

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