Exercise 6-11 Segmented Income Statement [LO6-4] Wingate Company, a wholesale di
ID: 2339019 • Letter: E
Question
Exercise 6-11 Segmented Income Statement [LO6-4]
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:
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
Prepare a contribution format income statement segmented by divisions, as desired by the president.
As a result of a marketing study, the president believes that sales in the West Division could be increased by 18% if monthly advertising in that division were increased by $29,000. Calculate the incremental net operating income.
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:
Explanation / Answer
Answer
East
Central
West
TOTAL
Sales
$ 428,000.00
$ 670,000.00
$ 500,000.00
$ 1,598,000.00
Variable expenses
$ 205,440.00
$ 241,200.00
$ 170,000.00
$ 616,640.00
Contribution margin
$ 222,560.00
$ 428,800.00
$ 330,000.00
$ 981,360.00
Traceable fixed expenses
$ 298,000.00
$ 332,000.00
$ 208,000.00
$ 838,000.00
Segment Margin
$ (75,440.00)
$ 96,800.00
$ 122,000.00
$ 143,360.00
Common Fixed expenses
$ 241,000.00
Net Operating Income (Loss)
$ (97,640.00)
East
Central
West
TOTAL
Sales
$ 428,000.00
$ 670,000.00
$ 590,000.00
$ 1,688,000.00
Variable expenses
$ 205,440.00
$ 241,200.00
$ 200,600.00
$ 647,240.00
Contribution margin
$ 222,560.00
$ 428,800.00
$ 389,400.00
$ 1,040,760.00
Traceable fixed expenses
$ 298,000.00
$ 332,000.00
$ 237,000.00
$ 867,000.00
Segment Margin
$ (75,440.00)
$ 96,800.00
$ 152,400.00
$ 173,760.00
Common Fixed expenses
$ 241,000.00
Net Operating Income (Loss)
$ (67,240.00)
Earlier Net Operating Income (Loss)
$ (97,640.00)
Incremental Net Operating Income
$ 30,400.00
YES, the increased advertising is RECOMMEDNED because the Incremental Net Operating Income is POSITIVE as Net Operating Loss is reducing by $ 30,400.
East
Central
West
TOTAL
Sales
$ 428,000.00
$ 670,000.00
$ 500,000.00
$ 1,598,000.00
Variable expenses
$ 205,440.00
$ 241,200.00
$ 170,000.00
$ 616,640.00
Contribution margin
$ 222,560.00
$ 428,800.00
$ 330,000.00
$ 981,360.00
Traceable fixed expenses
$ 298,000.00
$ 332,000.00
$ 208,000.00
$ 838,000.00
Segment Margin
$ (75,440.00)
$ 96,800.00
$ 122,000.00
$ 143,360.00
Common Fixed expenses
$ 241,000.00
Net Operating Income (Loss)
$ (97,640.00)