Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales$2,070,000 Variable expenses 895,880 Contribution margin 1,174,120 Fixed expenses 1,319,000 Operating loss$(144,880) In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following: Geographic Market SouthCentralNorth Sales$607,000 $806,000 $657,000 Variable expenses as a percentage of sales 50% 36% 46% Traceable fixed expenses$320,000 $480,000 $307,000 Required:1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. 2-a. The company’s sales manager believes that sales in the Central geographic market could be increased by 10% if monthly advertising is increased by $32,000. Calculate the incremental net operating income.

1. Working Notes:1The total traceable fixed expenses for each region =$1,107,000 where as the…

Answered: Bovine Company, a wholesale distributor…

College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

ChapterE: Departmental Accounting

Section: Chapter Questions

Problem 3P

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Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:


Sales	$	2,070,000
Variable expenses		895,880

Contribution margin		1,174,120
Fixed expenses		1,319,000

Operating loss	$	(144,880	)

In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following:

	Geographic Market

	South	Central	North
Sales	$	607,000		$	806,000		$	657,000
Variable expenses as a percentage of sales		50	%		36	%		46	%
Traceable fixed expenses	$	320,000		$	480,000		$	307,000

Required:
1. Prepare a contribution format income statement segmented by geographic market, as requested by the president.

2-a. The company’s sales manager believes that sales in the Central geographic market could be increased by 10% if monthly advertising is increased by $32,000. Calculate the incremental net operating income.

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