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Below are departmental Income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guit department since it has a net loss. The
Below are departmental Income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guit department since it has a net loss. The company classifies advertising, rent, and utilities expenses as Indirect. Electric $84,380 47,250 37,050 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2019 Acoustic Sales $102,200 Cost of goods sold 43,975 Gross profit 58, 225 Operating expenses Advertising expense 4,995 Depreciation expense-Equipment 10,130 Salaries expense 20,200 Supplies expense 1,950 Rent expense 7,975 Utilities expense 3,025 Total operating expenses 47,375 Net income (loss) $ 10,850 4,270 8,52e 17,100 1,790 6,83e 2,630 40, 340 $ (3,290) 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? 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
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