Exercise 22.7 Departmental contribution report LO P3 Below are departmental income statements for a guitar...
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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 olms SOUS.40 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustic Electric Sales $101,600 $81,300 Cost of goods sold 43,975 4095 Gross profit 36, 350 Operating expenses Advertising expense 5,015 Depreciation expense equipment 1e, esa 8.552 Salaries expense 19.500 17.00 Supplies expense 2.0ie 1.750 Rent expense 7, 1855 ,970 Utilities expense 2,985 Total operating expenses 46.695 Re Net Income (less) $ 12,93e $(4,210) 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 Total direct expenses Departmental contributions to overhead Indirect expenses Total indirect pens 2. Based on contribution to overhead, should the electric guitar department be eliminated? No Yes
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