Bovine Company, a wholesale distributor of DVDs, has been experiencing losses for some time,

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

Required:

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
Sales	$ 1,500,000	$ 400,000	$ 600,000	$ 500,000
Variable expenses	588,000	208,000	180,000	200,000
Contribution margin	912,000	192,000	420,000	300,000
Traceable fixed expenses	770,000	240,000	330,000	200,000
Geographic market segment margin	142,000	$ -48,000	$ 90,000	$ 100,000
Common fixed expenses not traceable to geographic markets	n/r
Net operating income (loss)	$ n/r

2a.	The company’s 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

$ n/r

2b.	Would you recommend the increased advertising?
	Yes