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

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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. (Input all amounts as positive value. Omit the "$" sign in your response.)

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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.

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SOLUTION

BEST GUITAR

Departmental Contribution Statements

For Year Ended December 31, 2011

(B) No, electric guitar department should not be eliminated.

Acoustic Dept ($) Electric Dept. ($) Combined ($) Sales 101,500 85,000 186,500 Cost of goods sold 45,675 46,750 92,425 Gross Profit (A) 55,825 38,250 94,075 Direct Expenses: Depreciation Expense 10,150 8,500 18,650 Salaries expense 20,300 17,000 37,300 Supplies expense 2,030 1,700 3,730 Total direct expenses (B) 32,480 27,200 59,680 Departmental contribution to overhead (A-B)=C 23,345 11,050 34,395 Indirect expenses: Advertising expense 9,325 Rent expense 13,055 Utilities expense 5,595 Total Indirect expenses (D) 27,975 Net Income (C-D) 6,420

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