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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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