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Exercise 22-7 Departmental contribution report LO P3 Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department
Exercise 22-7 Departmental contribution report LO P3 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 $103,300 $84,500 Cost of goods sold 44,475 47,550 Gross profit 58,825 36,950 Operating expenses Advertising expense 5,015 4,320 Depreciation expense-Equipment 10,140 8,510 Salaries expense 20,200 17,800 Supplies expense 1,960 1,740 Rent expense 7,075 6,020 Utilities expense 2,590 Total operating expenses 47,375 40,980 Net incone (loss) $ 11,450 $(4,030) 2,985 1. Prepare a departmental contribution report that shows each department's contribution to overhead. 2. Based on contribution to overhead, should the electric guitar department be eliminated? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a departmental contribution report that shows each department's 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 Departmental contributions to overhead Indirect expenses Total indirect expenses Required Required 2 > 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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