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Exercise 24-7 (Algo) Departmental contribution to overhead LO P3 Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities
Exercise 24-7 (Algo) Departmental contribution to overhead LO P3 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 Sales Acoustic Electric $ 102,000 83,900 Cost of goods sold 45,475 47,350 Gross profit 56,525 36,550 Expenses Advertising 4,985 4,290 Depreciation-Equipment 10,100 8,500 Salaries 20,000 17,300 Supplies used 1,950 1,770 Rent 7,005 6,020 Utilities 2,955 2,580 Total expenses 46,995 40,460 Income (loss) $ $ 9,530 (3,910) 1. Prepare a departmental contribution to overhead report. 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 Required 1 2 Prepare a departmental contribution to overhead report. Departmental Contribution to Overhead For Year Ended December 31 Gross profit Direct expenses Total direct expenses Departmental contribution to overhead Acoustic Electric Combined Required Required 1 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? < Required 1 Required 2 >
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