Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:       Sales $ 2,070,000     Variable expenses   895,880              Contribution margin   1,174,120     Fixed expenses   1,319,000              Operating loss $ (144,880 )             In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following:    Geographic Market       South Central North   Sales $ 607,000   $ 806,000   $ 657,000     Variable expenses as a percentage of sales   50 %   36 %   46 %   Traceable fixed expenses $ 320,000   $ 480,000   $ 307,000     Required:1. Prepare a contribution format income statement segmented by geographic market, as requested by the president.   2-a. The company’s sales manager believes that sales in the Central geographic market could be increased by 10% if monthly advertising is increased by $32,000. Calculate the incremental net operating income.

College Accounting (Book Only): A Career Approach
13th Edition
ISBN:9781337280570
Author:Scott, Cathy J.
Publisher:Scott, Cathy J.
ChapterE: Departmental Accounting
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Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:
 

  
  Sales $ 2,070,000  
  Variable expenses   895,880  
        
  Contribution margin   1,174,120  
  Fixed expenses   1,319,000  
        
  Operating loss $ (144,880 )
        
 

 
In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following:
 

  Geographic Market
   
  South Central North
  Sales $ 607,000   $ 806,000   $ 657,000  
  Variable expenses as a percentage of sales   50 %   36 %   46 %
  Traceable fixed expenses $ 320,000   $ 480,000   $ 307,000  
 


Required:
1. Prepare a contribution format income statement segmented by geographic market, as requested by the president.

 

2-a. The company’s sales manager believes that sales in the Central geographic market could be increased by 10% if monthly advertising is increased by $32,000. Calculate the incremental net operating income.

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ISBN:
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