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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.

WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017
	Acoustic			Electric
Sales	$	103,400		$	83,000
Cost of goods sold		43,975			47,250
Gross profit		59,425			35,750
Operating expenses
Advertising expense		5,025			4,320
Depreciation expenseequipment		10,090			8,560
Salaries expense		19,400			17,800
Supplies expense		1,980			1,790
Rent expense		7,045			5,980
Utilities expense		2,955			2,570
Total operating expenses		46,495			41,020
Net income (loss)	$	12,930		$	(5,270	)

1. Prepare a departmental contribution report that shows each departments 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 or No

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