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. For Year Ended December 31 Acoustic Electric Sales $ 102,200 $ 84,000 Cost of goods sold 43,975 47,550 Gross profit 58,225 36,450 Expenses Advertising 4,995 4,290 Depreciation—Equipment 10,100 8,570 Salaries 20,200 17,300 Supplies used 1,990 1,770 Rent 7,035 5,950 Utilities 2,975 2,640 Total expenses 47,295 40,520 Income (loss) $ 10,930 $ (4,070)
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. For Year Ended December 31 Acoustic Electric Sales $ 102,200 $ 84,000 Cost of goods sold 43,975 47,550 Gross profit 58,225 36,450 Expenses Advertising 4,995 4,290 Depreciation—Equipment 10,100 8,570 Salaries 20,200 17,300 Supplies used 1,990 1,770 Rent 7,035 5,950 Utilities 2,975 2,640 Total expenses 47,295 40,520 Income (loss) $ 10,930 $ (4,070)
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.
| For Year Ended December 31 | Acoustic | Electric |
|---|---|---|
| Sales | $ 102,200 | $ 84,000 |
| Cost of goods sold | 43,975 | 47,550 |
| Gross profit | 58,225 | 36,450 |
| Expenses | ||
| Advertising | 4,995 | 4,290 |
| 10,100 | 8,570 | |
| Salaries | 20,200 | 17,300 |
| Supplies used | 1,990 | 1,770 |
| Rent | 7,035 | 5,950 |
| Utilities | 2,975 | 2,640 |
| Total expenses | 47,295 | 40,520 |
| Income (loss) | $ 10,930 | $ (4,070) |
Transcribed Image Text:Required 1
Required 2
Based on contribution to overhead, should the electric guitar department be eliminated?
Based on contribution to overhead, should the electric guitar department be eliminated?
< Required 1
Required 2 >
Yes
No
Transcribed Image Text:Required 1
Required 2
Prepare a departmental contribution to overhead report.
Departmental Contribution to Overhead
For Year Ended December 31
Acoustic
Electric
Combined
Direct expenses
Total direct expenses
Departmental contribution to overhead
$
0 $
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