Question

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, 2017 Acoustic Electric Sales $101,999 $84,400 Cost of goods sold 45,375 47,150 Gross profit 56,525 37,250 Operating expenses Advertising expense 5,065 4,270 Depreciation expense-equipment 10,079 8,580 Salaries expense 19,700 17,500 Supplies expense 1,960 1,710 Rent expense 7,025 6,040 Utilities expense 3,025 2,570 Total operating expenses 46,845 40,670 Net income (loss) $ 9,680 $(3,420) 1. Prepare a departmental contribution report that shows each department's contribution to overhead.

Answer 1

D 4 E F 3 WHOLESALE GUITARS I ncome statement showing Departmental contribution to overhead 5 For year Ended December 31,2017 6 Particulars Acoustic Electric Combined 7 Sales $ 1,01,900 $ 84,400 $ 1,86,300 8 Cost of goods sold $ 45,375 $ 47,150 $ 92,525 9 Gross profit S 56,525 S 37,250 S 93,775 10 11 Direct Expenses 12 Depreciation expense on Equipment $ 10,070 $ 8,580 $ 18,650 13 Salaries Expense $ 19,700 $ 17,500$ 37,200 14 Supplies Expense $ 1,960 $ 1,710 $ 3,670 15 Total Direct Expense S 31,730 S 27,790 S 59,520 16 Departmental Contributions to overhead $ 24,795 $ 9,460 $ 34,255 17 18 Indirect Expenses 19 Advertising Expense(5065+4270) $ 9,335 20 Rent Expense(7025+6040) $ 13,065 21 Utilities Expense(3025+2570) $ 5,595 22 Total Indirect Expense $ 27,995 23 Operating Income S 6,260 24

3 4 5 F WHOLESALE GUITARS Income statement showing Departmental contribution to overhead For year Ended December 31, 2017 6 Particulars Acoustic Electric Combined 7 Sales 101900 84400 =SUM(D7:E7) 8 Cost of goods sold 45375 47150 =SUM(D8:E8) 9 Gross profit =+D7-DS =+E7-ES =SUMD9:E9) 10 11 Direct Expenses 12 Depreciation expense on Equipment 10070 8580 =SUM(D12:E12) 13 Salaries Expense 19700 17500 =SUM(D13:E13) 14 Supplies Expense 1960 1710 =SUM(D14:E14) 15 Total Direct Expense =SUM(D12:D14) =SUM(E12:E14) =SUM(D15:E15) 16 Departmental Contributions to overhead |=+D9-D15 =+E9-E15 =+F9-F15 17 18 Indirect Expenses 19 Advertising Expense(5065+4270) =5065+4270 20 Rent Expense(7025+6040) =7025+6040 21 Utilities Expense(3025+2570) =3025+2570 22 Total Indirect Expense =SUM(F19:F21) 23 Operating Income =+F16-F22 24