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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