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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.
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