1. value 10.00 points : O Below are departmental income statements for a guitar

Question

1. value 10.00 points : O 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 BEST GUITAR Departmental Income Statements For Year Ended December 31, 2011 Acoust Sales Cost of goods sold tic Electric S 101,600 84,300 45,175 47,350 Gross profit Operating expenses 56,425 36,950 Advertising expense Depreciation expense-equipment Salaries expense Supplies expense Rent expense Utilities expense 5,005 4.340 8,520 9,900 17.700 1,730 5,970 3,005 2.620 10,060 1,990 7,025 46,985 40,880 Total operating expenses Net profit (loss) s 9.440 (3,930)

Explanation / Answer

Department Contribution statement for the year ended Acoustic Dept Electric Dept Combined Sales $101,600 84300 $185,900 Cost of good sold 45175 47350 $92,525 Gross profit $56,425 $36,950 $93,375 Direct Expenses Depreciation expense-equipment 10060 8520 $18,580 Salaries expenses 19900 17700 $37,600 Supplies expenses 1990 1730 $3,720 Totat direct expenses 31950 27950 59900 Department Contribution to overhead $24,475 $9,000 $33,475 Indirect expenses Advertising expenses 9345 Rent expenses 12995 Utilities expenses 5625 Total indirect expenses 27965 Net operating income $5,510 ans 2 No it should be not eliminated as departmental contribution to overhead is $9000

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