Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,610,000 Variable expenses 659,000 Contribution margin 951,000 Fixed expenses 1,046,000 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: Division East Central West Sales $ 430,000 $ 610,000 $ 570,000 Variable expenses as a percentage of sales 52 % 34 % 40 % Traceable fixed expenses $ 288,000 $ 321,000 $ 193,000 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? Prepare a contribution format income statement segmented by divisions. Division Total Company East Central West 0 0 0 0 0 $0 $0 $0 $0 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 Would you recommend the increased advertising? ___ yes ___ No
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:
| Sales | $ | 1,610,000 |
| Variable expenses | 659,000 | |
| Contribution margin | 951,000 | |
| Fixed expenses | 1,046,000 | |
| 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:
|
Division |
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| East | Central | West | |||||||
| Sales | $ | 430,000 | $ | 610,000 | $ | 570,000 | |||
| Variable expenses as a percentage of sales | 52 | % | 34 | % | 40 | % | |||
| Traceable fixed expenses | $ | 288,000 | $ | 321,000 | $ | 193,000 | |||
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?
Prepare a contribution format income statement segmented by divisions.
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|
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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.)
|
Would you recommend the increased advertising?
___ yes
___ No
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