A company is a wholesale distributor of electronic equipment who has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales    P 1,000,000 Variable expenses    390,000 Contribution Margin    610,000 Fixed Expenses    625,000 Net operating Income (loss)    P(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    P250,000    P400,000    P350,000 Variable expenses as a percentage of sales    52%    30%    40% Traceable Fixed Expenses    P160,000    P200,000    P175,000 Required:     a.  Prepare a contribution format income statement segmented by the division.     East    Central    West                                b. The marketing department has proposed increasing the West Division’s monthly     advertising by P15,000 believing that it would increase the division’s sales by     20%. Assuming these estimates are accurate, how much would the company’s net     operating income increase/(decrease) if the proposal is implemented

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A company is a wholesale distributor of electronic equipment who has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:

Sales    P 1,000,000
Variable expenses    390,000
Contribution Margin    610,000
Fixed Expenses    625,000
Net operating Income (loss)    P(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    P250,000    P400,000    P350,000
Variable expenses as a percentage of sales    52%    30%    40%
Traceable Fixed Expenses    P160,000    P200,000    P175,000

Required:
    a.  Prepare a contribution format income statement segmented by the division.

    East    Central    West

 

 

 

 

 


            
        b. The marketing department has proposed increasing the West Division’s monthly     advertising by P15,000 believing that it would increase the division’s sales by     20%. Assuming these estimates are accurate, how much would the company’s net     operating income increase/(decrease) if the proposal is implemented?

 

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