Bovine company, a wholesale distributor of dvds…

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 expenses   588,000
 

Contribution margin   912,000
Fixed expenses   945,000
 

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

  South Central North
Sales $ 400,000   $ 600,000   $ 500,000  
Variable expenses as a percentage of sales   52 %   30 %   40 %
Traceable fixed expenses $ 240,000   $ 330,000   $ 200,000  

 

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
Company
South Central North
  $ $ $ $
         
 



         
         
 



    $ $ $
   





         
 
     
  $      
 

     

 

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?