Below are departmental income statements for a guitar manufacturer. The manufact

Question

Below are departmental income statements for a guitar manufacturer. The manufacturer is considering dropping 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, 2015 Acoustic Electric Sales $ 103,100 $ 84,200 Cost of goods sold 45,275 47,550 Gross profit 57,825 36,650 Operating expenses Advertising expense 5,045 4,330 Depreciation expense—equipment 10,100 8,580 Salaries expense 19,600 17,500 Supplies expense 1,970 1,790 Rent expense 7,025 6,050 Utilities expense 3,035 2,620 Total operating expenses 46,775 40,870 Net income (loss) $ 11,050 $ (4,220 )

Explanation / Answer

WHOLESALE GUITARS

Departmental Income Statement for the year ended December 31, 2015

Particulars Acoustic Electric

Sales 103100 84200

less: Cost of goods sold (45275) (47550)

Gross Profit 57825 36650

less: Operating expenses:

Advertising expense 5045 4330

Depreciation expense 10100 8580

Salaries expense 19600 17500

Rent expense 7025 6050

Supplies expense 1970 1790

Utilities expense 3035 2620

Net income(loss) 11050 (4220)

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