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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 $83,800 46,950 36,850 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2019 Acoustic Sales $ 101,900 Cost of goods sold 45,675 Gross profit 56,225 Operating expenses Advertising expense 5,025 Depreciation expense-Equipment 10,140 Salaries expense 19,600 Supplies expense 1,950 Rent expense 7,095 Utilities expense 3,035 Total operating expenses 46,845 Net income (loss) $ 9,380 4,260 8,600 17,000 1,770 6,020 2,600 40,250 $(3,400) 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 > 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? Yes No

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