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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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