Wingate Company, a wholesale distributor of electronic equipment, 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 Net operating incone (loss) $1,575,000 659, 400 915,600 1, 007, 000 S (91, 400) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Eant $435, 000 48% $264, 000 Central S600, 000 West $540, 000 Sales Variable expenses as a percentage of sales Traceable fixed expenses 40% 39% $326, 000 $197,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 12%. 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 for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating incone (loss) $1,575,000 659, 400 915,600 1, 007, 000 S (91, 400) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Eant $435, 000 48% $264, 000 Central S600, 000 West $540, 000 Sales Variable expenses as a percentage of sales Traceable fixed expenses 40% 39% $326, 000 $197,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 12%. 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

Section: Chapter Questions

Problem 1Q

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Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss. Departmental Income Statements For Year Ended December 31 Sales Cost of goods sold Gross profit Expenses Advertising Depreciation-Equipment Salaries Supplies used Rent Utilities Total expenses Income (loss) Required 1 Required 2 Acoustic $ 102,100 44,975 57,125 For Year Ended December 31 Gross profit Direct expenses 15,015 10,100 20,100 1. Prepare a departmental contribution to overhead report. 2. Based on contribution to overhead, should the electric guitar department be eliminated? Prepare a departmental contribution to overhead report. 1,960 7,065 2,995 47,235 $ 9,890 Complete this question by entering your answers in the tabs below. Total direct expenses Departmental contribution to overhead Departmental Contribution to Overhead $ Acoustic…
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Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss. Departmental Income Statements For Year Ended December 31 Acoustic Sales $ 102,900 Electric $ 84,000 Cost of goods sold Gross profit Expenses Advertising Depreciation-Equipment Salaries Supplies used Rent Utilities Total expenses 44,975 47,550 57,925 36,450 4,985 4,320 10,080 8,540 20,100 17,800 2,010 1,780 7,095 5,950 2,995 2,640 47,265 41,030 Income (loss) $ 10,660 $ (4,580) 1. Prepare a departmental contribution to overhead report. 2. Based on contribution to overhead, should the electric guitar department be eliminated?
Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss. Departmental Income Statements For Year Ended December 31 Acoustic Electric Sales $ 102,900 $ 83,300 Cost of goods sold 44,175 47,350 Gross profit 58,725 35,950 Expenses Advertising 4,995 4,270 Depreciation—Equipment 10,080 8,560 Salaries 19,800 17,200 Supplies used 2,000 1,700 Rent 7,055 6,030 Utilities 2,965 2,620 Total expenses 46,895 40,380 Income (loss) $ 11,830 $ (4,430) Prepare a departmental contribution to the overhead report. Based on contribution to overhead, should the electric guitar department be eliminated?
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Hancock Company manufactures and sells two lines of furniture, case goods and upholstery, During the most recent accounting period, the Case Goods and Upholstery Divisions sold 17,400 and 2,360 units, respectively. The company's most recent financial statements are shown below. Sales Less cost of goods sold: Unit-level production cost Depreciation, production equipment Gross margin Less operating expenses: Case Goods Upholstery $1,852,000 $472,000 1,156,000 276,000 $420,000 283,200 70,800 $118,000 Unit-level selling and administrative costs Corporate-level facility expenses (fixed) Net income (loss) If unit sales for both divisions increased 10% the company would report which of the following? 69,600 64,000 $286,400 59,000 64,000 $(5,000)
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