Question: 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, which follows: Sales $ 1,673,000 Variable expenses 553,060 Contribution margin 1,119,940 Fixed expenses 1,232,000 Net operating income (loss) $ (112,060) In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 403,000 $ 680,000 $ 590,000 Variable expenses as a percentage of sales 42 % 20 % 42 % Traceable fixed expenses $ 254,000 $ 339,000 $ 202,000
Required: 1. Prepare a contribution format income statement segmented by divisions, as desired by the president.
2-a. As a result of a marketing study, the president believes that sales in the West Division could be increased by 11% if monthly advertising in that division were increased by $22,000. Calculate the incremental net operating income.