Wingate Company, a wholesale distributor of electronic equipment, has been exper

Question

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 Variable expenses Contribution margin Fixed expenses Net operating income (oss) $1,702.000 631.100 1,070.900 (107,100) 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: Central 5422,000 $700,000 $580,000 Sales 55% 28% 35% Traceable foxed 296,000 331 199,000 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 $21,000 based on the belief that it would increase that division's sales by 17%. 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? Complete this question by entering your answers in the tabs below Req 1 Req 2A Req 2B Prepare a contribution format income statement segmented by divisions. Total C East Central West Req 2A

Explanation / Answer

Total company East Central West Sales 1702000 422000 700000 580000 Variable expenses 631100 232100 196000 203000 Contribution margin 1070900 189900 504000 377000 Traceable fixed expenses 826000 296000 331000 199000 Divisional segment margin 244900 -106100 173000 178000 Common fixed expenses not traceable to divisions 352000 Net operating loss -107100 2a Incremental sales 98600 =580000*17% Contribution margin ratio 65% =377000/580000 Incremental contribution margin 64090 Less incremental advertising expense 21000 Incremental net operating income 43090 b Yes, the advertising program should be taken

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