Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirectexpenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss.Departmental Income StatementsFor Year Ended December 31SalesCost of goods soldGross profitExpensesAdvertisingDepreciation-EquipmentSalariesSupplies usedRentUtilitiesTotal expensesIncome (loss)Acoustic$ 101,60044,87556,7255,04510,11019,5001,9807,0053,02546,665$ 10,060Electric$ 83,80046,95036,8504,3208,51017,3001,7805,9802,57040,460$ (3,610)1. Prepare a departmental contribution to overhead report.2. Based on contribution to overhead, should the electric guitar department be eliminated? Required 1 Required 2Prepare a departmental contribution to overhead report.Departmental Contribution to OverheadFor Year Ended December 31Gross profitDirect expensesTotal direct expensesDepartmental contribution to overheadAcousticElectricCombined

Gross profit less direct production costs is the formula used to determine the departmental overhead…

expenses. The manufacturer is considering eliminating its Electric Guitar department becaus Departmental Income Statements For Year Ended December 31 Sales Cost of goods sold Gross profit Expenses Advertising Depreciation-Equipment Salaries Supplies used Acoustic $ 101,600 44,875 56,725 5,045 10,110 19,500 1,980 Electric $ 83,800 46,950 36,850 4,320 8,510 17,300 1,780