Question

Chapter 6 ExercisesX+ :0.5640399510776057 1523818424733 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, which follows Sales Variable expenses $ 1,687,000 564,690 Contribution margin Fixed expenses 1,122,310 1,235,000 Net operating income (loss) $ (112,690) 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 Central 417000 $670,000 $600,000 East West Sales Variable expenses as a percentage of sales Traceable fixed expenses 47% 21% 38% $251,000 $321,000 $197,000 Required: 1. Prepare a contribution format income statement segmented by divisions, as desired by the president Total C East Central West 2-a As a result of a marketing study, the president believes that sales in the West Division could be increased by 14% if monthly advertising in that division were increased by $29,000. Calculate the incremental net operating income

Answer 1

SEGMENT-WISE INCOME STATEMENT
				TOTAL	East	Central	West
				AMOUNT $	AMOUNT $	AMOUNT $	AMOUNT $
Sales Revenue				1,687,000	417,000	670,000	600,000
Less: Variable Cost				564,690	195,990	140,700	228,000
Contribution margin				1,122,310	221,010	529,300	372,000
Less: Traceable Fixed cost				769,000	251,000	321,000	197,000
SEGMENT MARGIN				353,310	-29,990	208,300	175,000
Less: Common Fixed cost				466,000
Net Operating Income				-112,690
Req 2-a:
Incremental income:
Increase in revenue of West division (600,000*14%)					84000
CM ratio (100-38)					62%
Incremental Contribution margin					52080
Less: Advertisement expense					29000
Incremental income:					23080