Question

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 Variable expenses Contribution margin Fixed expenses Net operating income (loss) 1,524.ee 598,488 925.600 1,018, eee 192.480) $ 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: East $394,000 Division Central $600,000 256 Variable expenses as a percentage of sales Traceable fixed expenses West $530,000 4815 $191,080 $265,000 $337,882 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 sales by 19%. 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? Complete this question by entering your answers in the tabs below. Reg 1 Red 2A Req 2B Prepare a contribution format income statement segmented by divisions. Division Central Total Company East West 0 % 0 % 0 % 0

Answer 1

Sale Variabel Expenses Sales *Variable Expenses Ratio Contribution Margin Traceable Fixed Expenses Divisional Margin common Fixed Cost Net operating Income Total Company 1524000 598400 925600 793000 132600 225000 -92400 Divisions East Central 394000 600000 236400 150000 157600 450000 265000 337000 -107400 113000 west 530000 212000 318000 191000 127000 2A) West Division Sales Will increase by 19% and advertisement Will increse by 21,000? Increase in Contribution Margin 318000*19% 60420 LESS: Increase in Fixed Cost 21,000 Incremental Net operating income 39,420 Net Operating income Will Increase by $39420 Would you recommend the increased advertising YES Nad