Wingate Company, a wholesale distributor of electronic equipment, has been exper

Question

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, which follows: Sales Variable expenses $ 1,561,000 630,030 Contribution margin Fixed expenses 930,970 1,024,000 Net operating income (loss) $ (93,030) In an effort to isolate the problem, the president has asked for an income statement segmented by division Accordingly, the Accounting Department has developed the following information: DIviSIon Central $361,000 $680,000 $520,000 East West Sales Variable expenses as a percentage of sales Traceable fixed expenses 43% 40% 39% $272,000 $324,000 $194,000 Required 1. Prepare a contribution format income statement segmented by divisions, as desired by the president. Division Central West Total Company $1,561,000 361,000 680,000 520,000 East Sales Variable expenses Contribution margin Traceable fixed expenses Divisional segment margin Common fixed expenses not traceable to divisions Net operating loss 630,030 520,000 194,000 930,970 $ 89,000 $ 356,000$ 326,000 930,970 361,000 680,000 272,000 324,000 930,970

Explanation / Answer

contribution income statement

total east central west

2 A) west region (after increase in sales

sales $ 608400 (520000+17% of 5200000)

variable cost $ 205800(including 30000 increase)

contribution $ 402600

fixed cost $ 194000

divisional profit $ 208600

Incremental net operating income $208600 - $123200 = $85400

2 B) yes I recommend the advertising

sales $ 1561000 $361000 $ 680000 $520000 variable cost $ 630030 $155230 $272000 $202800 contribution margin $ 930970 $205770 $ 408000 $ 317200 fixed cost $272000 $324000 $194000 divisional segment margin $ (-)66230 $84000 $ 123200

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