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	$	103,100		$	84,200
Cost of goods sold		44,575			47,250
Gross profit		58,525			36,950
Operating expenses
Advertising expense		5,045			4,280
Depreciation expenseEquipment		10,120			8,580
Salaries expense		19,900			17,500
Supplies expense		1,970			1,730
Rent expense		7,085			6,040
Utilities expense		2,985			2,640
Total operating expenses		47,105			40,770
Net income (loss)	$	11,420		$	(3,820	)

1. Prepare a departmental contribution report that shows each departments contribution to overhead. 2. Based on contribution to overhead, should the electric guitar department be eliminated?

Prepare a departmental contribution report that shows each departments contribution to overhead.

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

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

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