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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

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 $ 101,800 $ 84,900
Cost of goods sold 45,575 47,150
Gross profit 56,225 37,750
Operating expenses
Advertising expense 5,045 4,250
Depreciation expenseEquipment 10,060 8,560
Salaries expense 19,600 17,200
Supplies expense 1,950 1,740
Rent expense 7,075 6,030
Utilities expense 3,005 2,630
Total operating expenses 46,735 40,410
Net income (loss) $ 9,490 $ (2,660 )

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 0 0 0
Departmental contributions to overhead $0 $0 $0
Indirect expenses
Total indirect expenses 0
$0

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