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. Electric $84,900 47,050 37,850 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2019 Acoustic Sales $101,800 Cost of goods sold 44,075 Gross profit 57,725 Operating expenses Advertising expense 5,015 Depreciation expense-Equipment 10,100 Salaries expense 20,200 Supplies expense 2,020 Rent expense 7,035 Utilities expense 2,955 Total operating expenses 47,325 Net income (loss) $ 10,400 4,31 8,540 17,100 1,730 6,000 2,620 40,300 $(2,450) 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 QS 22-10 Computing residual income LO A1 The following information is provided for each division. Investment Center Cameras and camcorders Phones and communications Computers and accessories Net Income $6,550,000 2,506,000 1,000,000 Average Assets $ 23,000,000 17,900,000 11,800,000 Assume a target income of 14% of average invested assets. Required: Compute residual income for each division. (Enter losses with a minus sign.) Target Income Cameras and Camcorders Phones and Communications Computers and Accessories % % % Targeted return Target income Residual Income Cameras and Camcorders Phones and Communications Computers and Accessories Residual income (loss)