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 (loss) $1,575,000 659, 400 915,600 1, 007, 000 S (91, 400) 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: Eant $435, 000 48% $264, 000 Central S600, 000 West $540, 000 Sales Variable expenses as a percentage of sales Traceable fixed expenses 40% 39% $326, 000 $197,000 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 $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) if the proposal is implemented? 2-b, Would you recommend the increased advertising?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
$ 1,575, 000
659, 400
915, 600
1,007, 000
$ (01, 400)
Net operating income (loss)
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
$435, 000
West
$540, 000
Sales
Variable expenses as a percentage of sales
Traceable fixed expenses
S600, 000
40%
$326, 000
48%
39%
$264, 000
$197,000
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 $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) if the proposal is implemented?
2-b. Would you recommend the increased advertising?
Transcribed Image Text: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 $ 1,575, 000 659, 400 915, 600 1,007, 000 $ (01, 400) Net operating income (loss) 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 $435, 000 West $540, 000 Sales Variable expenses as a percentage of sales Traceable fixed expenses S600, 000 40% $326, 000 48% 39% $264, 000 $197,000 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 $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) if the proposal is implemented? 2-b. Would you recommend the increased advertising?
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