Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and...
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Accounting
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
$ 102,300
$ 83,400
Cost of goods sold
45,675
46,950
Gross profit
56,625
36,450
Expenses
Advertising
5,045
4,340
DepreciationEquipment
10,130
8,590
Salaries
19,400
17,400
Supplies used
1,930
1,770
Rent
7,085
5,970
Utilities
2,955
2,620
Total expenses
46,545
40,690
Income (loss)
$ 10,080
$ (4,240)
1. Prepare a departmental contribution to overhead report. 2. Based on contribution to overhead, should the electric guitar department be eliminated?
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