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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) $1,606,000 606, 480 999,520 1,099,000 $ (99,480) 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 $ 386,000 48% $ 253,000 Division Central $ 640,000 35% $ 329,000 Required: 1. Prepare a contribution format income statement segmented by divisions. West $ 580,000 34% $ 193,000 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $28,000 will increase that division's sales by 15%. 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?

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) $1,606,000 606, 480 999,520 1,099,000 $ (99,480) 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 $ 386,000 48% $ 253,000 Division Central $ 640,000 35% $ 329,000 Required: 1. Prepare a contribution format income statement segmented by divisions. West $ 580,000 34% $ 193,000 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $28,000 will increase that division's sales by 15%. 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
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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) $ 1,606, 000 606, 480 999,520 1,099,000 $ (99,480) 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 $ 386,000 48% $ 253,000 Division Central $ 640,000 35% $ 329,000 West $ 580,000 34% $ 193,000 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 $28,000 will increase that division's sales by 15%. 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) $ 1,606, 000 606, 480 999,520 1,099,000 $ (99,480) 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 $ 386,000 48% $ 253,000 Division Central $ 640,000 35% $ 329,000 West $ 580,000 34% $ 193,000 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 $28,000 will increase that division's sales by 15%. 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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