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 | $ | 1,689,000 |
Variable expenses | 663,450 | |
Contribution margin | 1,025,550 | |
Fixed expenses | 1,128,000 | |
Net operating income (loss) | $ | (102,450) |
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 | $ | 449,000 | $ | 690,000 | $ | 550,000 | |||
Variable expenses as a percentage of sales | 45 | % | 31 | % | 45 | % | |||
Traceable fixed expenses | $ | 267,000 | $ | 322,000 | $ | 209,000 | |||
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 $20,000 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?
1 | ||||
Division | ||||
Total Company | East | Central | West | |
Sales | 1689000 | 449000 | 690000 | 550000 |
Variable expenses | 663450 | 202050 | 213900 | 247500 |
Contribution margin | 1025550 | 246950 | 476100 | 302500 |
Traceable fixed expenses | 798000 | 267000 | 322000 | 209000 |
Divisional segment margin | 227550 | -20050 | 154100 | 93500 |
Common fixed expenses not traceable to divisions | 330000 | |||
Net operating loss | (102450) | |||
2 | ||||
Incremental West Division sales | 104500 | =550000*19% | ||
X Contribution margin ratio | 55% | =1-45% | ||
Incremental contribution margin | 57475 | |||
Less incremental advertising expense | 20000 | |||
Net operating income will increase by | 37475 | |||
b | ||||
Yes, the advertising program should be initiated. |
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as...
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 $ 1,649,000 Variable expenses 687,570 Contribution margin 961,430 Fixed expenses 1,058,000 Net operating income (loss) $ (96,570) 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 $ 449,000 $...
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
$
1,579,000
Variable expenses
691,900
Contribution margin
887,100
Fixed expenses
976,000
Net operating income (loss)
$
(88,900)
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
$
449,000
$...
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 $ 1,718,000 Variable expenses 628,020 Contribution margin 1,089,980 Fixed expenses 1,199,000 Net operating income (loss) $ (109,020) 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 $ 438,000 $...
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 $ 1,595,000 Variable expenses 665,750 Contribution margin 929,250 Fixed expenses 1,022,000 Net operating income (loss) $ (92,750) 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 $ 415,000 $...
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
$
1,556,000
Variable expenses
582,380
Contribution margin
973,620
Fixed expenses
1,071,000
Net operating income (loss)
$
(97,380)
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
$
366,000
$...
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 incone (less) $ 1.783.000 577,918 1.125.90 1,238, cee $ (112,910) 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: West $590,000 Sales Variable expenses as a...
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) $1,634,80e 580, 228 1,053,780 1,159,90e (105,220) 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 $424,000 $68e,00 $530,e00 Sales Variable...
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) $1,000,000 390,000 610,000 625,000 $ (15,000) 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: Sales Variable expenses as a percentage of sales Traceable...
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 $ 1,672,000 Variable expenses 740,640 Contribution margin 931,360 Fixed expenses 1,024,000 Net operating income (loss) $ (92,640) 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 $ 402,000 $...
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 $ 1,648,000 Variable expenses 671,840 Contribution margin 976,160 Fixed expenses 1,074,000 Net operating income (loss) $ (97,840) 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 $ 398,000 $...