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 Income (loss) Acoustic $ 102,500 44,575 57,925 4,985 10,120 19,400 2,010 7,095 3,015 46,625 $ 11,300 Electric $ 84,600 47,350 37,250 4,300 8,600 17,000 1,750 5,976 2,610 41,010 $ (3,780) 1. Prepare a departmental contribution to overhead report 2. Based on contribution to overhead, should the electric guitar department be eliminated?

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 Income (loss) Acoustic $ 102,500 44,575 57,925 4,985 10,120 19,400 2,010 7,095 3,015 46,625 $ 11,300 Electric $ 84,600 47,350 37,250 4,300 8,600 17,000 1,750 5,976 2,610 41,010 $ (3,780) 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

Section: Chapter Questions

Problem 1Q

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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 Acoustic Electric Sales $ 102,900 $ 83,300 Cost of goods sold 44,175 47,350 Gross profit 58,725 35,950 Expenses Advertising 4,995 4,270 Depreciation—Equipment 10,080 8,560 Salaries 19,800 17,200 Supplies used 2,000 1,700 Rent 7,055 6,030 Utilities 2,965 2,620 Total expenses 46,895 40,380 Income (loss) $ 11,830 $ (4,430) Prepare a departmental contribution to the overhead report. Based on contribution to overhead, should the electric guitar department be eliminated?
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