Homework answers / question archive / Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $1,000,000 Variable expenses 396, 000 Contribution margin 604,000 Fixed expenses 652,000 Operating loss $ (48,000) In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market

Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $1,000,000 Variable expenses 396, 000 Contribution margin 604,000 Fixed expenses 652,000 Operating loss $ (48,000) In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market

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Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its
most recent monthly contribution format income statement:

Sales $1,000,000

Variable expenses 396, 000

Contribution

margin 604,000

Fixed expenses 652,000

Operating loss $ (48,000)

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:

Geographic Market
South Central North
Sales $300,000 $400,000 $300,000
Variable expenses as a
percentage of sales 52% 30% 40%
Traceable fixed expenses $160,000 $265,000 $150,000

Required:

1. Prepare a contribution format income statement segmented by geographic market, as requested by the president.
Sales
CC
Contribution margin Po

raceable fixed expenses PC
Geographic market segment loss Pd
‘Common fixed expenses not traceable to F
geographic markets

2-a. The company’s sales manager believes that sales in the Central geographic market could be increased by 15% if

monthly advertising is increased by $13,000. Calculate the incremental net operating income.

2-b. Would you recommend the increased advertising?

Yes
No