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 $1,583,000 606,870 Contribution margin Fixed expenses 976,130 1,074,000 Net operating income (loss) $ (97,870) 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 $403,000 $680,000 $500,000 East West Sales Variable expenses as a percentage of sales Traceable fixed expenses 4996 37% $293,000 $336,000 $192,000 Required 1. Prepare a contribution format income statement segmented by divisions, as desired by the president. Division Total CompanyEast Central West

Explanation / Answer

Total Company East Central West Sales                     1,583,000       403,000       680,000       500,000 Variable Expenses                        606,870       197,470       224,400       185,000 Contribution Margin (Sales-variable Cost                        976,130       205,530       455,600       315,000 Fixed Cost                     1,074,000       293,000       336,000       192,000 Operating Income                         -97,870        -87,470       119,600       123,000 If advertising Expenses increased by 19% Total Company East Central West Sales                     1,678,000       403,000       680,000       595,000 Variable Expenses                        642,020       197,470       224,400       220,150 Additional Advertising Expense                          26,000         26,000 Fixed Cost                     1,074,000       293,000       336,000       192,000 Operating Income                         -64,020        -87,470       119,600       156,850 yes advertising expenses should increase because it's reduce company net operation loss

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