Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin. Fixed expenses Net operating income (loss) $ 1,551,000 618,590 932,410 1,026,000 $ (93,590) In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $ 381,000 49% $ 259,000 Division Central $ 610,000 35% $ 324,000 West $ 560,000 39% $ 195,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $29,000 will increase that division's sales by 14%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly
contribution format income statement:
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income (loss)
$ 1,551,000
618,590
932,410
1,026,000
$ (93,590)
In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the
Accounting Department provided the following information:
Sales
Variable expenses as a percentage of sales
Traceable fixed expenses
East
$ 381,000
49%
$ 259,000
Division
Central
$ 610,000
35%
$ 324,000
West
$ 560,000
39%
$ 195,000
Required:
1. Prepare a contribution format income statement segmented by divisions.
2-a. The Marketing Department believes increasing the West Division's monthly advertising by $29,000 will increase that division's
sales by 14%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the
proposal is implemented?
2-b. Would you recommend the increased advertising?
Transcribed Image Text:Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,551,000 618,590 932,410 1,026,000 $ (93,590) In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $ 381,000 49% $ 259,000 Division Central $ 610,000 35% $ 324,000 West $ 560,000 39% $ 195,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $29,000 will increase that division's sales by 14%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising?
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