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. Electric $84, 700 46.950 37,750 WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustic Sales $103.300 Cont of goods sold 44,975 Gross profit 58,325 Operating expenses Advertising expense 5,065 Depreciation expense-equipment 10,140 Salarios expense 19,400 Supplies expense 2.010 Rent expense 7.075 Utilities expense 3.015 Total operating expenses 46,705 Set income (los) $ 11,620 4,290 8,510 17,500 1.900 5,960 2.590 40,650 (2.900)

Answer 1

WHOLESALE GUITARS
Income Statement Showing Departmental Contribution to Overhead
For Year Ended December 31, 2017
	Acoustic Dept.	Electric Dept.	Combined
Sales	$103,300	$84,700	$188,000
Cost of goods sold	$44,975	$46,950	$91,925
Gross Profit	$58,325	$37,750	$96,075
Direct expenses
Salaries expense	$19,400	$17,500	$36,900
Depreciation expense-equipment	$10,140	$8,510	$18,650
Supplies expense	$2,010	$1,800	$3,810
Total direct expense	$31,550	$27,810	$59,360
Departmental contributions to overhead	$26,775	$9,940	$36,715
Indirect expenses
Rent expense			$13,035
Utilities expense			$5,605
Advertising expense			$9,355
Total indirect expense			$27,995
Operating income			$8,720