FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Req 2B
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? (Do not round intermediate calculations.)
Net operating income will
increase
by
< Req 1
Req 2B >
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Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B 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? (Do not round intermediate calculations.) Net operating income will increase by < Req 1 Req 2B >
Sales
$ 1,555,000
Variable expenses
Contribution margin
Fixed expenses
601,000
954,000
1,049,000
Net operating income (loss)
$ (95,000)
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:
East
Division
Central
$ 620,000
39%
Sales
$ 355,000
44%
West
$ 580,000
35%
Variable expenses as a percentage of sales
Traceable fixed expenses
$ 265,000
$ 337,000
$ 200,000
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 $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.
Req 1
Reg 2A
Req 2B
Prepare a contribution format income statement segmented by divisions.
Division
Total Company East
Central
West
Sales
Variable expenses
$ 1,555,000 $ 355,000 S 620,000 $ 580,000
156,200 241,800 203,000
198,800 378,200 377,000
Contribution margin
1,555,000
Traceable fixed expenses
Divisional segment margin
1,555,000 $ 198,800 $378,200 $ 377,000
Common fixed expenses not traceable to divisions
Net operating loss
$ 1,555,000
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Transcribed Image Text:Sales $ 1,555,000 Variable expenses Contribution margin Fixed expenses 601,000 954,000 1,049,000 Net operating income (loss) $ (95,000) 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: East Division Central $ 620,000 39% Sales $ 355,000 44% West $ 580,000 35% Variable expenses as a percentage of sales Traceable fixed expenses $ 265,000 $ 337,000 $ 200,000 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 $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. Req 1 Reg 2A Req 2B Prepare a contribution format income statement segmented by divisions. Division Total Company East Central West Sales Variable expenses $ 1,555,000 $ 355,000 S 620,000 $ 580,000 156,200 241,800 203,000 198,800 378,200 377,000 Contribution margin 1,555,000 Traceable fixed expenses Divisional segment margin 1,555,000 $ 198,800 $378,200 $ 377,000 Common fixed expenses not traceable to divisions Net operating loss $ 1,555,000
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