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, 2017
	Acoustic			Electric
Sales	$	102,900		$	83,900
Cost of goods sold		45,575			46,850
Gross profit		57,325			37,050
Operating expenses
Advertising expense		5,065			4,250
Depreciation expenseequipment		10,060			8,580
Salaries expense		20,000			17,800
Supplies expense		2,010			1,740
Rent expense		7,025			6,000
Utilities expense		3,035			2,610
Total operating expenses		47,195			40,980
Net income (loss)	$	10,130		$	(3,930	)

1. 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, 2017
	Acoustic Dept.	Electric Dept.	Combined
Direct expenses
Total direct expenses	0	0	0
Departmental contributions to overhead	$0	$0	$0
Indirect expenses
Total indirect expenses			0
			$0

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

• No

• Yes