Bovine Company, a wholesale distributor of DVDs, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement below:
Sales$1,500,000
Variable expenses588,000
Contribution margin912,000
Fixed expenses945,000
Net operating loss$(33,000)
In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following data:
Geographic Market
SouthCentralNorth
Sales$400,000$600,000$500,000
Variable expenses as a percentage of sales52%30%40%
Traceable fixed expenses$240,000$330,000$200,000
Required:
1.
Prepare a contribution format income statement segmented by geographic market, as desired by the president. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the “$” sign in your response.)
Geographic Market
Total
CompanySouthCentralNorth
$$$$
$$$
$
2a.
The company%u2019s sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising were increased by $25,000. Calculate the incremental net operating income. (Omit the “$” sign in your response.)
Incremental net operating income$
2b.Would you recommend the increased advertising?
Yes
No