mework for Chapter 6 6 Help Sen Wingate Company, a wholesale distributor of elec

Question

mework for Chapter 6 6 Help Sen 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 incone (loss) s 1,888,889 90,e88 610,000 625,880 s (15,808) eBook Hnt Print 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: eferences East Central West s 258,80 409,000 358,80 Sales Variable expenses as a percentage of sales Traceable fixed expenses 52% 30% 40% 168,00 s 280,0175,009 1. Prepare e contribution format income statement segmented by divisions 2-a. The Marketing Depertment hes 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? 2-b Would you recommend the increased advertising? Complete this question by entering your answers in the tabs below Prev 1 of 2 Next> pe here to search

Explanation / Answer

Rq 1 SEGMENT-WISE INCOME STATEMENT TOTAL EAST CENTRAL WEST AMOUNT $ AMOUNT $ AMOUNT $ AMOUNT $ Sales Revenue 1,000,000 250,000 400,000 350,000 Less: variable costing 390,000 130,000 120,000 140,000 Contribution mamrgin 610,000 120,000 280,000 210,000 Less: Traceable fixed cost 535,000 160,000 200,000 175,000 SEGMENT MARGIN 75,000 -40,000 80,000 35,000 Less: Common fixed cost 90,000 Net Operating Income -15,000 Req 2: CM ratio in west division: 40% Advertisement cost: $ 15,000 Increase in sales revenue: 20% Increase in sales revenue in $ (350,000*20%: $ 70,000 Additional contribution earned (70000*40%) 28000 Less: advertisement cost 15000 Increase in profits 13000 Req 2-B: YES, advertisement in West division is recommended

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