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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 $105,500 66,750 38, 750 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustie Sales $112,500 Cost of goods sold 55,675 Gross profit 56,825 Operating expenses Advertising expense 8,075 Depreciation expense-Equipment 10, 150 Salaries expense 17,300 Supplies expense 2.030 Rent expense 6,105 Utilities expense 3,045 Total operating expenses 46,705 Net Income (loss) $ 10,120 6,250 9,000 13,500 1.700 5,950 2,550 38,950 (200) $ 1. Prepare a departmental contribution report that shows each department's contribution to overhead. 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 J ANNI 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 No

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