Accounting Help

Accounting Help

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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
$ 1,589,000
Variable
expenses
697,580
Contribution
margin
891,420
Fixed
expenses
981,000
Net operating
loss
$
(89,580)
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
$ 379,000
$ 660,000
$ 550,000
Variabl
e
expense
s as a
percenta
ge of
sales
52%
35%
49%
Tracea
ble fixed
expense
s
$ 265,000
$ 334,000
$ 201,000
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.)
Geographic Market
Total
Company
South
Central
North
$
$
$
$
$
$
$

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2a.
The company’s sales manager believes that sales in the Central geographic market could be
increased by 20% if monthly advertising were increased by $22,000. Calculate the incremental net
operating income.
Incremental net operating income
$
2b.
Would you recommend the increased advertising?
No
Yes
Marple Associates is a consulting firm that specializes in information systems for construction and
landscaping companies. The firm has two offices—one in Houston and one in Dallas. The firm classifies
the direct costs of consulting jobs as variable costs. A segmented contribution format income statement
for the company’s most recent year is given below:
Office
Total
Compa
ny
Housto
n
Dallas
Sales
$
937,50
0
100.0%
$
187,50
0
100%
$
750,00
0
100%
Variab
le
expens
es
506,25
0
54.0
56,250
30
450,00
0
60
Contri
bution
margin
431,25
0
46.0
131,25
0
70
300,00
0
40
Trace
able
fixed
expens
es
210,00
0
22.4
97,500
52
112,50
0
15
Office
segme
nt
margin
221,25
0
23.6
$
33,750
18%
$
187,50
0
25%
Com
mon
fixed
expens
es not
trace
able to
150,00
0
16.0

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