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Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time,...

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Accounting

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 $ 1,617,000
Variable expenses 577,490
Contribution margin 1,039,510
Fixed expenses 1,143,000
Net operating income (loss) $ (103,490)

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 $ 437,000 $ 650,000 $ 530,000
Variable expenses as a percentage of sales 47 % 23 % 42 %
Traceable fixed expenses $ 288,000 $ 324,000 $ 206,000

Required:

1. Prepare a contribution format income statement segmented by divisions.

2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $25,000 based on the belief that it would increase that division's sales by 11%. 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?

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