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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 $183,200 $84,700 Cost of goods sola 45,375 47,150 Gross profit 57,825 37,550 Operating expenses Advertising expense 5,015 4,270 Depreciation expense-Equipment 10,060 8,560 Salaries expense 19,500 17,900 Supplies expense 1,950 1,760 Rent expense 7,095 5,980 Utilities expense 2,985 2,630 Total operating expenses 46,515 41,100 Net income (loss) $ 11,310 $(3,550) 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? Saved H WHOLESALE GUITARS Income Statement Showing Departmental Contribution to Overhead For Year Ended December 31, 2019 Acoustic Dept. Electric Dept. Combined Direct expenses 0 0 Total direct expenses Departmental contributions to overhead Indirect expenses 5 0 S OS 0 Total indirect expenses 5 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Based on contribution to overhead, should the electric guitar department be eliminated? Based on contribution to overhead, should the electric guitar department be eliminated?
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