Below are departmental income statements for a guitar manufacturer. The manufact
ID: 2498748 • Letter: B
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.
Prepare a departmental contribution report that shows each department’s contribution to overhead.
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.
Explanation / Answer
WHOLESALE GUITAR
Departmental Contribution Statements
For Year Ended December 31, 2013
Acoustic
Electric
Dept.
Dept.
Combined
Sales
$ 102,900
$83,200
$ 186,100
Cost of goods sold
44,575
47,150
91,725
Gross profit
58,325
36,050
94,375
Direct Expenses
31930
27940
59870
Indirect Expenses
15035
12890
27925
Net Income(loss)
11360
(4780)
6580
2. No.
Gross Profit Ratio = Gross Profit/ Net Sales*100
=36050/83200*100
=43.32%
Acoustic
Electric
Dept.
Dept.
Combined
Sales
$ 102,900
$83,200
$ 186,100
Cost of goods sold
44,575
47,150
91,725
Gross profit
58,325
36,050
94,375
Direct Expenses
31930
27940
59870
Indirect Expenses
15035
12890
27925
Net Income(loss)
11360
(4780)
6580
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