Prepare a departmental contribution report

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Reference no: EM132840430

Problem - 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, 2019

 

Acoustic

Electric

Sales

$102,600

$83,600

Cost of goods sold

44,375

47,050

Gross profit

58,225

36,550

Operating expenses

 

 

Advertising expense

5,005

4,300

Depreciation expense-Equipment

10,140

8,510

Salaries expense

19,500

17,900

Supplies expense

2,030

1,800

Rent expense

7,055

5,980

Utilities expense

2,945

2,630

Total operating expenses

46,675

41,120

Net income (loss)

$11,550

$(4,570)

Required -

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?

Reference no: EM132840430

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