Question

Exercise 22-7 Departmental contribution report LO P3 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 $ 103,500 $83,400 Cost of goods sold 44,475 47, 450 Gross profit 59,025 35,950 Operating expenses Advertising expense 4,9854 ,290 Depreciation expense-equipment 10,0608 ,590 Salaries expense 20, 300 17,900 Supplies expense 1,960 1,720 Rent expense 7,085 5,970 Utilities expense 2,995 2,550 Total operating expenses 47,385 41,020 Net income (loss) $ 11,640 $ (5,070)

Answer 1

cost of good sold WHOLESALE GUITARS Income statement showing departmental contribution to Overhead for the year ended December 31, 2017 Palticulars Acoustic Electric combined. dept dept sales $186,900 $103, svo $83,400 44,475 47,450 91,925 Gross Peopt 59,025 35,950 94,975 Direct expenses 18,650 Depreciation 8,590 10,060 salaries expense 19,900 38,200 201300 supplies expense 1,960 1720 3680 Total direct expenses 32,320 28,210 60,530 Departmental contrbution 26pos 71740 34 uus to overhead 9,275 13,055 sisus Indirect expenses Advertising expenses Rent expense utilities expense Total indirect expense Net Income 27,875 6,570 2 No, should not be eliminated.

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