Bovine Company, a wholesale distributor of DVDs, has been experiencing losses fo

Question

Bovine Company, a wholesale distributor of DVDs, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement below:

In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following data:

Geographic Market

The company

Bovine Company, a wholesale distributor of DVDs, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement below:

Explanation / Answer

After incurring advertisement expenses in central sales =$ 630,000*1.18= $743,400 Variable expenses =26%*$743,400 =193284 Fixed expenses=$ 328,000 +$29,000= $357,000 Incremental net operating income =($743,400 -193284-$357,000 )-($ 630,000-26%*$ 630,000-$328,000 ) = 54,916

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