Managerial Accounting: E12-16 Wingate Company, a wholesale distributor of videotapes

Managerial Accounting 
E12-16 Segmented Income Statement 
Wingate Company, a wholesale distributor of videotapes, has been experiencing losses for sometime, as shown by its most recent monthly contribution format income statement, which follows: 
Sales 1,000,000 
Variable expenses 390,000 
Contribution margin 610,000 
Fixed expenses 625,000 
Net operating income (loss) (15,000) 
In an effort to isolate the problem, the president has asked for an income statement segmented bydivision. Accordingly, the Accounting Department has developed the following information: 
Division 
East Central West 
Sales 250,000 400,000 350,000 
Variable expenses as a percentage of sales 52% 30% 40%
Traceable fixed expenses 160,000 200,000 175,000 

Required: 
1. Prepare a contribution format income statement segmented by divisions, as desired by the president. 
2. As a result of a marketing study, the president believes that sales in the West Division could be increased by 20% if monthly advertising in that division were increased by $15,000. Would you recommend the increased advertising? Show computations to support your answer.
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