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 Fixed expenses Contribution margin Net operating income (loss) $ 1,691,000 705,770 985,230 1,084,000 5 (98,770) 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: East Sales $ 421,900 Centrat 690,000 $ 580,000 Variable expenses as a percentage of sales Traceable fixed expenses 57 % 28% 37% $ 259,000 $ 321,000 $196, 088 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 $21000 based on the belief that it would increase that division's sales by 20% 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 Fixed expenses Contribution margin Net operating income (loss) $ 1,691,000 705,770 985,230 1,084,000 5 (98,770) 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: East Sales $ 421,900 Centrat 690,000 $ 580,000 Variable expenses as a percentage of sales Traceable fixed expenses 57 % 28% 37% $ 259,000 $ 321,000 $196, 088 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 $21000 based on the belief that it would increase that division's sales by 20% 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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Vishnu
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
Fixed expenses
Contribution margin
Net operating income (loss)
$ 1,691,000
705,770
985,230
1,084,000
S (98, 770)
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:
Check my wor
East
Sales
$ 421,000
Division
Centrat
$690,000
West
$ 580,000
Variable expenses as
peritage of sales
57 %
28%
47%
Traceable fixed expenses
$ 259,000
$ 321, ᎾᎾᎾ
$196,088
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 $21,000 based on the belief that it
would increase that division's sales by 20%. 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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