2060 CH 6 HW EX 6-11 FALL 2017 6 Hel Wingate Company, a wholesale distributor of

Question

2060 CH 6 HW EX 6-11 FALL 2017 6 Hel 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) s 1,603,000 589,550 1,013,450 1,115,000 $ (101,550) 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 $383,000 $670,000 $550,000 $251,000 $336,000 $205,000 361 Variable expenses as a percentage of sales Traceable fixed expenses Required 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $26,000 based on the bellef that it would increase that division's sales by 17% Assuming these estimates are accurate, h income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising? ow muchwould the company's net operating Complete this question by entering your answers in the tabs below.

Explanation / Answer

1.

2a. West increase in sales= 550000*17%= 93500

Contribution from increase sales= 93500*(1-0.32)= 63580

Net increase in income= excess contribution - advertising costs= 63580-26000= 37580

2b. As it results in incremental income of 37580, it is suggested.

Particulars East Central West Total Sales 383000 670000 550000 1603000 Variable expenses 172350 241200 176000 589550 Contribution 210650 428800 374000 1013450 Fixed costs- Traceble 251000 336000 205000 792000 Segment profit -40350 92800 169000 221450 Fixed costs- Common(1115000-792000) 323000 Profit Net -101550

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