Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric g department since it has a net loss.
The company classifies advertising, rent, and utilities expenses as indirect WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustic Electric $85,000 47,650 37,350 Sales $101,600 Cost of goods sold Gross profit Operating expenses Advertising expense
Depreciation expense-equipment Salaries expense Supplies expense Rent expense Utilities expense Total operating expenses Net income (loss) 44,675 56,925 5,e15 10,11e 19,600 1,970 7,045 4,330 8,590 17,800 1,760 5,950 2,640 2,955 46,695 41,070 $ 10,230 $(3,720) 1. Prepare a departmental contribution report that shows each department's contribution to overhead WHOLESALE GUITARS Income Statement Showing Departmental Contribution to Overhead For Year Ended December 31, 2017, Acoustic Dept Electric Dept Combined 3 of 5 Direct expenses Total direct expenses Departmental contributions to overhead Indirect expenses Total indirect expenses 2. Based on contribution to overhead, should the electric guitar department be eliminated? search.
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