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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) $ 1,566,000 489,600 1,076,400 1,184,000 $ (107,600) 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 East $ 396,000 Division Central $ 660,000 West $510,000 Variable expenses as a percentage of sales Traceable fixed expenses 45% 24% 30% $ 279,000 $ 329,000 $ 210,000 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 19%. 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) $ 1,566,000 489,600 1,076,400 1,184,000 $ (107,600) 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 East $ 396,000 Division Central $ 660,000 West $510,000 Variable expenses as a percentage of sales Traceable fixed expenses 45% 24% 30% $ 279,000 $ 329,000 $ 210,000 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 19%. 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
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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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) $ 1,566,000 489,600 1,076,400 1,184,000 $ (107,600) 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 East $ 396,000 Division Central $ 660,000 West $ 510,000 Variable expenses as a percentage of sales Traceable fixed expenses 45% 24% 30% $ 279,000 $ 329,000 $ 210,000 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 19%. 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? Complete this question by entering your answers in the tabs below.
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) $ 1,566,000 489,600 1,076,400 1,184,000 $ (107,600) 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 East $ 396,000 Division Central $ 660,000 West $ 510,000 Variable expenses as a percentage of sales Traceable fixed expenses 45% 24% 30% $ 279,000 $ 329,000 $ 210,000 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 19%. 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? Complete this question by entering your answers in the tabs below.
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