Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,672,000 670,460 1,001,540 1,102,000 $ (100,460) In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $ 442,000 48% $ 289,000 Division Central $ 680,000 31% $ 334,000 West $ 550,000 45% $ 207,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $22,000 will increase that division's sales by 13%. Assuming these estimates are accu 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 as shown by its most recent monthly
contribution format income statement:
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income (loss)
$ 1,672,000
670,460
1,001,540
1,102,000
$ (100,460)
In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the
Accounting Department provided the following information:
Sales
Variable expenses as a percentage of sales
Traceable fixed expenses
East
$ 442,000
48%
$ 289,000
Division
Central
$ 680,000
31%
$ 334,000
West
$ 550,000
45%
$ 207,000
Required:
1. Prepare a contribution format income statement segmented by divisions.
2-a. The Marketing Department believes increasing the West Division's monthly advertising by $22,000 will 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?
Transcribed Image Text:Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,672,000 670,460 1,001,540 1,102,000 $ (100,460) In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $ 442,000 48% $ 289,000 Division Central $ 680,000 31% $ 334,000 West $ 550,000 45% $ 207,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $22,000 will 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?
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