Reference no: EM132502385

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 $ 1,609,000
Variable expenses 570,030
Contribution margin 1,038,970
Fixed expenses 1,143,000
Net operating income (loss) $ (104,030)

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 $359,000 $670,000 $580,000
Variable expenses as a percentage of sales 47% 27% 38%
Traceable fixed expenses $299,000 $327,000 $191,000

Required:

Question 1: Prepare a contribution format income statement segmented by divisions.

Question 2: The Marketing Department has proposed increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 12%. Assuming these estimates are accurate, how much would the company's net operating
income increase (decrease) ifthe proposal is implemented?

Question 3: Would you recommend the increased advertising?