2. Based on contribution to overhead, should the electric guitar department be eliminated?

( ) No

( ) Yes

Exercise 24-7 Departmental contribution report LO P3 Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect. Electric $83,700 47, 450 36,250 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustic Sales $102,800 Cost of goods sold 44,675 Gross profit 58,125 Operating expenses Advertising expense 5,025 Depreciation expense-equipment 10,130 Salaries expense 19,900 Supplies expense 2,000 Rent expense 7,035 Utilities expense 2,985 Total operating expenses 47,075 Net income (loss) $ 11,050 4,300 8,510 17,100 1,760 6,020 2,560 40,250 $(4,000) 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 Direct expenses Total direct expenses Departmental contributions to overhead Indirect expenses Total indirect expenses