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: 3.07 points $ Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) 1,571,800 696,160 874,840 962,800 (87,160) $ eBook 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: Hint Division Central $610,000 Print East $401,000 56% $294,800 Sales Variable expenses as a percentage of sales Traceable fixed expenses West $560,000 45% $196,800 $327,000 References 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 $29,000 based on the belief that it would increase that division's sales by 13%. 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 Reg 2A Req 28 Prepare a contribution format income statement segmented by divisions. Sales Variable expenses Contribution margin Common fixed expenses not traceable to divisions Gross loss Fixed manufacturing overhead Net operating income Total Company $ 1,571,000 | 696,160 | 874,840 817,000 57,840 Division East Central $ 401,000 $ 610,000 224,560 219,600 176,440 390,400 294,000 1 327,000 S (117,560) $ 63,400 West $ 560,000 252,000 308,000 196,000 $ 112,000 $ 57,840 - Reqi Req 2A >

Answer 1

Answer: -

Net Operating Income will Increase by $52,440

Incremental West Division sales ($600,000 × 18%)	$108,000
Contribution margin ratio ($408,000 ÷ $600,000)	68%
Incremental contribution margin	$73440
Less incremental advertising expense	$21000
Incremental net operating income	$52440