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: Sales $ 1,629,000 Variable expenses 727,530 Contribution margin 901,470 Fixed expenses 992,000 Net operating income (loss) $ (90,530) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 449,000 $ 610,000 $ 570,000 Variable expenses as a percentage of sales 57 % 39 % 41 % Traceable fixed expenses $ 291,000 $ 325,000 $ 200,000 Required:
1. Prepare a contribution format income statement segmented by divisions.
2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $26,000 based on the belief that it would increase that division's sales by 11%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?
2-b. Would you recommend the increased advertising?