Bovine Company, a wholesale distributor of DVDs, has been experiencing losses fo
ID: 2427874 • Letter: B
Question
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:
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
Prepare a contribution format income statement segmented by geographic market, as desired by the president.
The company’s sales manager believes that sales in the Central geographic market could be increased by 14% if monthly advertising were increased by $25,000. Calculate the incremental net operating income.
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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:
Explanation / Answer
1. INCOME STATEMENT
GEOGRAPHIC MARKET
Particulars South Central North
Sales 357000 670000 530000
less: variable expenses (203490) (227800) (196100)
Contribution 153510 442200 333900
less: fixed expenses (263000) (324000) (208000)
Net operating income (109490) 118200 125900
2a.
Particulars Central
Sales 763800
less: variable expenses (259692)
Contribution 504108
less: fixed expenses (349000)
Operating income 155108.
2b. yes, advertising expenses is rewcommended. because it is selling and distribution expenses. it comes under fixed expenses.