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 $ 1,535,000 Variable expenses 553,150 Contribution margin 981,850 Fixed expenses 1,080,000 Net operating income (loss) $ (98,150) 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 $ 355,000 $ 660,000 $ 520,000 Variable expenses as a percentage of sales 53 % 23 % 41 % Traceable fixed expenses $ 296,000 $ 331,000 $ 202,000 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 $28,000 based on the belief that it would increase that division's sales by 16%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented

Wingate Company

1. Contribution Format Income Statement (segmented by divisions):

                                         East             Central           West              Total

Sales                             $ 355,000   $ 660,000   $ 520,000  $ 1,535,000

Variable Expenses            188,150         151,800       213,200         553,150

Contribution                     166,850       508,200      306,800         981,850

Traceable Fixed Exp.      296,000        331,000      202,000        829,000

Non-Traceable Fixed Expenses                                                      251,000

Net operating income/

(Loss)                              (129,150)         177,200      104,800          (98,150)

2a) Increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 16%:

                                       East             Central           West              Total

Sales                             $ 355,000   $ 660,000   $ 603,200    $ 1,618,200

Variable Expenses            188,150         151,800       213,200         553,150

Contribution                     166,850       508,200      390,000      1,065,050

Traceable Fixed Exp.      296,000        331,000      230,000        857,000

Non-Traceable Fixed Expenses                                                      251,000

Net operating income/

(Loss)                              (129,150)         177,200      160,000          (42,950)

2b) The net operating income will increase by $55,200, thus reducing the loss from $98,150 to $42,950.

Explanation:

Segmenting the income statement into divisions helps management to trace the loss making division as Division East.  The division has a traceable fixed cost that is far above its contribution to profit.  The fixed expense must be studied, otherwise the division may be up for closure.

years agooo ahaha. but honestly they need to update ! : )

answer; hazards;