Question
Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department since it has a net loss.
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. WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2019 Acoustic Electric. Sales $101,900 $84,900 Cost of goods sold 44,375 47,050 Gross profit 57,525 37,850 Operating expenses Advertising expense 5,015 4,340 Depreciation expense-Equipment 10,050 8,510 Salaries expense 19,600 17,400 Supplies expense 1,950 1,710 Rent expense 7.055 6,030 Utilities expense 3,015 2,620 Total operating expenses 46,685 40,610 Net income (loss) $ 10,840 $(2,760) 1. Prepare a departmental contribution report that shows each department's contribution to overhead. 2. Based on contribution to overhead, should the electric guitar department be eliminated? Complete this question by entering your answers in the tabs below.
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