Question

Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $22,000 based on the belief that it would increase that division's sales by 13%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented

Answer 1

hello your question is incomplete attached below is the complete question

1) attached below

2a) $19340

2b) yes

Step-by-step explanation:

1) Prepare The contribution format income statement

variable cost :

east = 446,000 * 50% = 223,000

west = 600,000 * 47% = 282,000

central = 660,000 * 39% = 257400

attached below is the table ( screenshot from my excel )

2a) Determine how much the net operating income would increase

= ( Increase in contribution margin )- ( Increase in fixed cost )

= $41340 - $22,000 = $19340

where :

Increase in contribution margin = 318,000 * 13% = $41340

Increase in fixed cost = $22,000

2b) I will recommend the increased advertising because the increase in net operating income