Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect. WHOLESALE GUITARSDepartmental Income StatementsFor Year Ended December 31, 2019 Acoustic Electric Sales $ 102,600 $ 84,200 Cost of goods sold 45,375 47,650 Gross profit 57,225 36,550 Operating expenses Advertising expense 5,055 4,280 Depreciation expense—Equipment 10,110 8,500 Salaries expense 19,500 17,800 Supplies expense 1,940 1,760 Rent expense 7,065 6,030 Utilities expense 2,945 2,600 Total operating expenses 46,615 40,970 Net income (loss) $ 10,610 $ (4,420 ) 1. Prepare a departmental contribution report that shows each department’s contribution to overhead.2. Based on contribution to overhead, should the electric guitar department be eliminated?
Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect. WHOLESALE GUITARSDepartmental Income StatementsFor Year Ended December 31, 2019 Acoustic Electric Sales $ 102,600 $ 84,200 Cost of goods sold 45,375 47,650 Gross profit 57,225 36,550 Operating expenses Advertising expense 5,055 4,280 Depreciation expense—Equipment 10,110 8,500 Salaries expense 19,500 17,800 Supplies expense 1,940 1,760 Rent expense 7,065 6,030 Utilities expense 2,945 2,600 Total operating expenses 46,615 40,970 Net income (loss) $ 10,610 $ (4,420 ) 1. Prepare a departmental contribution report that shows each department’s contribution to overhead.2. Based on contribution to overhead, should the electric guitar department be eliminated?
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 manufacturer is considering eliminating its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect.
| WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2019 |
|||||||
| Acoustic | Electric | ||||||
| Sales | $ | 102,600 | $ | 84,200 | |||
| Cost of goods sold | 45,375 | 47,650 | |||||
| Gross profit | 57,225 | 36,550 | |||||
| Operating expenses | |||||||
| Advertising expense | 5,055 | 4,280 | |||||
| Depreciation expense—Equipment | 10,110 | 8,500 | |||||
| Salaries expense | 19,500 | 17,800 | |||||
| Supplies expense | 1,940 | 1,760 | |||||
| Rent expense | 7,065 | 6,030 | |||||
| Utilities expense | 2,945 | 2,600 | |||||
| Total operating expenses | 46,615 | 40,970 | |||||
| Net income (loss) | $ | 10,610 | $ | (4,420 | ) | ||
1. Prepare a departmental contribution report that shows each department’s contribution to
2. Based on contribution to overhead, should the electric guitar department be eliminated?
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