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) $ 1,595,000 652,500 942,500 1,037,000 $ (94,500) 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 $395,000 54% $ 290,000 Division. Central $ 640,000 31% $ 320,000 West $ 560,000 43% $ 192,000 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 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?

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) $ 1,595,000 652,500 942,500 1,037,000 $ (94,500) 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 $395,000 54% $ 290,000 Division. Central $ 640,000 31% $ 320,000 West $ 560,000 43% $ 192,000 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 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

Section: Chapter Questions

Problem 1Q

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