Exercise $22-7($Algo$)$ Departmental contribution to overhead LO P$3$

Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss.

Departmental Income Statements

For Year Ended December $31$ Acoustic Electric

Sales $ $103,200$ $ $84,600$

Cost of goods sold $45,17546,950$

Gross profit $58,02537,650$

Expenses

Advertising $5,0654,320$

Depreciation$$Equipment $10,1108,520$

Salaries $19,90017,600$

Supplies used $1,9701,730$

Rent $7,0656,010$

Utilities $2,9752,620$

Total expenses $47,08540,800$

Income $($loss$)$ $ $10,940$ $ $(3,150)$

Prepare a departmental contribution to overhead report.

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