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) $ 1,535,000 629,600 905,400 996,000 (90,600) $ 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 Division East Central $385,000 $610,000 $286,000 $334,000 58% 25% West $540,000 $193,000 47% 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 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 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) $ 1,535,000 629,600 905,400 996,000 (90,600) $ 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 Division East Central $385,000 $610,000 $286,000 $334,000 58% 25% West $540,000 $193,000 47% 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 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
Related questions
Question
hh.2
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)
$ 1,535,000
629,600
905,400
996,000
(90,600)
$
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
Division
Central
$385,000 $610,000
East
$286,000 $334,000
58%
25%
West
$540,000
$193,000
47%
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 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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