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 Variable expenses Contribution margin Fixed expenses Operating loss $2,170,000 860,440 1,309,560 1,339,000 $ (29,440) 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: Sales Variable expenses as a percentage of sales Traceable fixed expenses Sales Variable expenses Contribution margin Traceable fixed expenses Geographic market segment margin Common fixed expenses not traceable to geographic markets Operating income Incremental net operating income South $617,000 $359,000 Required: 1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. North Geographic Market Central $816,000 $737,000 30% 40% $547,000 $317,000 $ 52% Total Company $ 0 0 0 $ South Geographic Market Central 0 0 $ 0 0 $ North 0 2-a. The company's sales manager believes that sales in the Central geographic market could be increased by 15% If monthly advertising is increased by $42,000. Calculate the incremental net operating income.
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 Variable expenses Contribution margin Fixed expenses Operating loss $2,170,000 860,440 1,309,560 1,339,000 $ (29,440) 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: Sales Variable expenses as a percentage of sales Traceable fixed expenses Sales Variable expenses Contribution margin Traceable fixed expenses Geographic market segment margin Common fixed expenses not traceable to geographic markets Operating income Incremental net operating income South $617,000 $359,000 Required: 1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. North Geographic Market Central $816,000 $737,000 30% 40% $547,000 $317,000 $ 52% Total Company $ 0 0 0 $ South Geographic Market Central 0 0 $ 0 0 $ North 0 2-a. The company's sales manager believes that sales in the Central geographic market could be increased by 15% If monthly advertising is increased by $42,000. Calculate the incremental net operating income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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: 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: Required: 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 15% If monthly
advertising is increased by $42, 000. Calculate the incremental net operating income. 2- b. Would you
recommend the increased advertising?
Transcribed Image Text: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
Variable expenses
Contribution margin
Fixed expenses
Operating loss
$2,170,000
860,440
1,309,560
1,339,000
$ (29,440)
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:
Sales
Variable expenses as a percentage of sales
Traceable fixed expenses
Sales
Variable expenses
Contribution margin
Traceable fixed expenses
Geographic market segment margin
Common fixed expenses not traceable to geographic markets
Operating income
Incremental net operating income
North
Geographic Market
South Central
$617,000 $816,000 $737,000
30%
40%
$359,000
$547,000 $317,000
Required:
1. Prepare a contribution format income statement segmented by geographic market, as requested by the president.
52%
Total
Company
$
$
0
0
0
$
South
Geographic Market
Central
0
0
$
0
0 $
North
0
0
2-a. The company's sales manager believes that sales in the Central geographic market could be increased by 15% If monthly
advertising is increased by $42,000. Calculate the incremental net operating income.
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