Cost Accounting: Wingate Company, a wholesale distributor of electronic equipment, has been

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement:

Sales $ 1,595,000
Variable expenses 635,300
Contribution margin 959,700
Fixed expenses 1,056,000
Net operating income (loss) $ (96,300)
In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information:

Division
East Central West
Sales $ 445,000 $ 640,000 $ 510,000
Variable expenses as a percentage of sales 44% 36% 41%
Traceable fixed expenses $ 292,000 $ 322,000 $ 207,000
Required:
1. Prepare a contribution format income statement segmented by divisions.

2-a. The Marketing Department believes increasing the West Division's monthly advertising by $27,000 will increase that division's sales by 15%. 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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