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Safarl File Edit View History Bookmarks Window Help Chapter 6 Homework G Help Save & Exit Submit 3 Exercise 6-11 Segmented Income Statement [LO6-4) 142 points Wingate Company, a wholesale distributor of eléctronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement ,536,000 Variable expenses Contribution nargi Fixed expene Set operating Sneome los) 1·10,000" 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 Centralest Varlable expense4 as percentage of aales Teaceable fixed expenaes 416,000610,000 10-oo0 $296,000$323,000 $195,000 25N 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 $28,000 based on the belief that it would increase that division's sales by 18%, Assuming these estimates are accurate, how much would the company's net operati ncome increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising?

Explanation / Answer

SOLUTION

1.

*Common fixed expenses not traceable to divisions = $1,108,000-$814,000 = $294,000

2A.

2B. Yes, the advertising program should be initiated.

Total company ($) East ($) Central ($) West ($) Sales 1,536,000 416,000 610,000 510,000 Variable expenses 528,800 208,000 152,500 168,300 Contribution margin 1,007,200 208,000 457,500 341,700 Traceable fixed expenses 814,000 296,000 323,000 195,000 Divisional segment margin 193,200 (88,000) 134,500 146,700 Common fixed expenses not traceable to divisions* 294,000 Net opearting income / (Loss) (100,800)

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