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 (loss) $1,577,000 693,268 883,740 972,800 s (88,260) 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 357,000 $690,00e $530,800 Sales Variable expenses as a percentage of sales Traceable fixed expenses 48% 38% 49% $260,e00 $330,000 $208,000

Explanation / Answer

a)             Division                     total East Central West company Sales 1,577,000 357,000 690,000 530,000 less variable expense 693,260 171360 262200 259700 Contribution margin 883,740 185,640 427,800 270,300 Traceable fixed expense 798000 260,000 330,000 208,000 Divisional segment margin 85,740 -74,360 97,800 62,300 common fixed expenses not traceable to divisions 174000 net operating loss -88,260 b) increase in contribution 270,300*12%= 32436 less increase in advertising 27,000 net operating income increases by 5,436 net operating income will increase by 5,436 c) yes

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