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 $83,100 47,250 35,850 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2019 Acoustic Sales $102,700 Cost of goods sold 43,875 Gross profit 58,825 Operating expenses Advertising expense 5,005 Depreciation expense-Equipment 10,050 Salaries expense 20,300 Supplies expense 1,950 Rent expense 7,025 Utilities expense 2,965 Total operating expenses 47,295 Net income (loss) $ 11,530 4,270 8,530 17,900 1,710 5,980 2,590 40,980 $(5,130) 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? 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 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?