Exercise 24-7 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 $83,500 47,350 36,150 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustic Sales $103, 400 Cost of goods sold 45,575 Gross profit 57,825 Operating expenses Advertising expense 5,025 Depreciation expense-equipment 10, 110 Salaries expense 20,300 Supplies expense 1,940 Rent expense 7,015 Utilities expense 3,005 Total operating expenses 47,395 Net income (loss) $ 10,430 4,260 8,540 17,700 1,700 5,960 2,590 40,750 $(4,600) 1. 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, 2017 Acoustic Dept. Electric Dept. Combined Direct expenses Total direct expenses Departmental contributions to overhead Indirect expenses Total indirect expenses 2. Based on contribution to overhead, should the electric guitar department be eliminated? Yes