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 income (loss) $ 1,646,000 612.900 1,033, 100 1,136,000 $ (102,900) 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: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $426,000 45% $ 264,000 Division Central $ 620,000 366 $ 340,000 West $ 600,000 33% $ 203,000 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 $23,000 based on the belief that it i would increase that division's sales by 18%. 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 income (loss) $ 1,646,000 612.900 1,033, 100 1,136,000 $ (102,900) 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: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $426,000 45% $ 264,000 Division Central $ 620,000 366 $ 340,000 West $ 600,000 33% $ 203,000 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 $23,000 based on the belief that it i would increase that division's sales by 18%. 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 for some time, as shown by its most
recent monthly contribution format income statement:
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income (loss)
$ 1,646,000
612,900
1,033, 100
1,136,000
$ (102,900)
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:
Sales
Variable expenses as a percentage of sales
Traceable fixed expenses
East
$ 426,000
458
$ 264,000
Division
Central
$ 620,000
368
$ 340,000
West
$ 600,000
331
$203,000
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 $23,000 based on the belief that it
would increase that division's sales by 18%. 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:Req 1
Req 2A
Prepare a contribution format income statement segmented by divisions.
noy &
Req 2B
ney GM
ney 20
by
Total Company East
Would you recommend the increased advertising?
Yes
ONO
$
0
0 $
0
to
0 $
Division
Central
0
The Marketing Department has proposed increasing the West Division's monthly advertising by $23,000 based on the belief
that it would increase that division's sales by 18%. Assuming these estimates are accurate, how much would the company's
net operating income increase (decrease) if the proposal is implemented? (Do not round intermediate calculations.)
Net operating income will
0 $
West
0
0
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