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, 2019AcousticElectricSales$102,900$83,100Cost of goods sold44,47547,550Gross profit58,42535,550Operating expensesAdvertising expense5,0654,330Depreciation expense?Equipment10,1408,570Salaries expense19,50017,600Supplies expense2,0201,700Rent expense7,0756,050Utilities expense2,9552,560Total operating expenses46,75540,810Net income (loss)$11,670$(5,260)

1.Make 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?

WHOLESALE GUITARS Income Statement Showing Departmental Contribution to Overhead For Year Ended December 31, 2019 Acoustic Dept. Electric Dept. Combined Direct expenses Total direct expenses Departmental contributions to overhead Indirect expenses Total indirect expenses