EXERCISE 6-11 Segmented Income Statement LO6-4 Wingate Company, a wholesale dist
ID: 2611353 • Letter: E
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EXERCISE 6-11 Segmented Income Statement LO6-4 Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses or some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses.... Net operating income (loss). $1,000,000 390,000 610,000 625,000 $ (15,000) 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 Division East Central West Sales . Variable expenses as a percentage of sales Traceable fixed expenses $250,000 $400,000 $350,000 30% $160,000 $200,000 $175,000 52% 40% Required: I. Prepare a contribution format income statement segmented by divisions. 2. The Marketing Department has proposed increasing the West Division's monthly advertising by $15,000 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? Income Statement; Reconciliation L06- 2, LO6-3 absorption cost-Explanation / Answer
Division
Particulars
Company
East
Central
West
1,000,000
250,000
400,000
350,000
2. Variable Expenses
390,000
130,000
120,000
140,000
3.Contribution Margin (1-2)
610,000
120,000
280,000
210,000
4.Traceable Fixed Expenses
535,000
160,000
200,000
175,000
5.Net Income (3-4)
75,000
-40,000
80,000
35,000
2. As per Marketing Department Sales of west Increase by 20 %
a. Revised Sales
350000*1.2
420000
Advertising Cost
15000
b. Revised Traceable Fixed Expenses
175000+15000
190000
Revised Contribution Income format (Amount in $)
Division
Particulars
Company
East
Central
West
1,070,000
250,000
400,000
420,000
2. Variable Expenses
418,000
130,000
120,000
168,000
3. Contribution Margin (1-2)
652,000
120,000
280,000
252,000
4.Traceable Fixed Expenses
550,000
160,000
200,000
190,000
5. Net Income (3-4)
102,000
-40,000
80,000
62,000
Increase/(Decrease) in Net income:
A.Net Income After Proposal Implemented $
102000
B. Net Income Before Proposal$
75000
Net Increase/(Decrease) (A-B)$
27000
$27000 Net operating income increased if the proposal is implemented.
Division
Particulars
Company
East
Central
West
- Sales
1,000,000
250,000
400,000
350,000
2. Variable Expenses
390,000
130,000
120,000
140,000
3.Contribution Margin (1-2)
610,000
120,000
280,000
210,000
4.Traceable Fixed Expenses
535,000
160,000
200,000
175,000
5.Net Income (3-4)
75,000
-40,000
80,000
35,000
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