1. Prepare a departmental contribution to overhead report. 2. Based on contribution to overhead, should the electric guitar department be eliminated?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect
expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss.
Departmental Income Statements
For Year Ended December 31
Sales
Cost of goods sold
Gross profit
Expenses
Advertising
Depreciation-Equipment
Salaries
Supplies used
Rent
Utilities
Total expenses
Acoustic
$ 101,600
43,875
Electric
$ 84,500
47,650
57,725
36,850
5,025
4,290
10,100
8,500
20,200
17,500
1,980
1,730
7,035
5,960
3,035
2,640
47,375
40,620
Income (loss)
$ 10,350
$ (3,770)
1. Prepare a departmental contribution to overhead report.
2. Based on contribution to overhead, should the electric guitar department be eliminated?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Prepare a departmental contribution to overhead report.
Departmental Contribution to Overhead
For Year Ended December 31
Sales
Gross profit
Direct expenses
Total direct expenses
Departmental contribution to overhead
Acoustic
Electric
Combined
Transcribed Image Text:Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss. Departmental Income Statements For Year Ended December 31 Sales Cost of goods sold Gross profit Expenses Advertising Depreciation-Equipment Salaries Supplies used Rent Utilities Total expenses Acoustic $ 101,600 43,875 Electric $ 84,500 47,650 57,725 36,850 5,025 4,290 10,100 8,500 20,200 17,500 1,980 1,730 7,035 5,960 3,035 2,640 47,375 40,620 Income (loss) $ 10,350 $ (3,770) 1. Prepare a departmental contribution to overhead report. 2. Based on contribution to overhead, should the electric guitar department be eliminated? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a departmental contribution to overhead report. Departmental Contribution to Overhead For Year Ended December 31 Sales Gross profit Direct expenses Total direct expenses Departmental contribution to overhead Acoustic Electric Combined
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