Business, 07.03.2020 06:31, christyr2002
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 $1,000,000
Variable expenses 390,000
Contribution margin 610,000
Fixed expenses 625,000
Net operating income (loss)$ (15,000)
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 $250,000 $400,000 $350,000
Variable expenses as a percentage of sales 52% 30% 40%
Traceable fixed expenses $160,000 $200,000 $175,000
Required:
a. Prepare a contribution format income statement segmented by divisions, as desired by the president.
b. As a result of a marketing study, the president believes that sales in the West Division could be increased by 20% if monthly advertising in that division were increased by $15,000. Calculate the incremental net operating income.
c. Would you recommend the increased advertising? Yes/No
Answers: 1
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