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 Pixed expenses Net operating income (loss) $1,672,000 616,480 1,055, 520 1,161,000 (105,480) 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 Central $382,000 $700,000 $590,000 East West Sales Variab Traceable fixed expenses le expenses as a percentage of sales 59 23% $251,000 $329,000 $204,000 $204 39 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 $20,000 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?

Explanation / Answer

Segment income Statement Total East Central West Sales 1672000 382000 700000 590000 Less: Variable cost 616480 225380 161000 230100 Contributiton margin 1055520 156620 539000 359900 Less: Traceable Fixed cocst 784000 251000 329000 204000 Segment margin 271520 -94380 210000 155900 Less: Common Fixed cost 377000 Net income -105480 Req b: Additional advertisement expense (Fixed cost) 20000 Increase in sales of West division 17% Increase in saless in $ (590000*17%) 100300 Contribution margin ratio (100-39) 61% Additional contribution margin 61183 Less: Additional fixed cost 20000 Net additional income 41183 Req c: Yes, Additional advertising expense is recommended

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.