Question

Below are departmental income statements for a guitar manufactu rer. 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 $101,900 $83,100 47,750 45,175 56,725 Cost of goods sold Gross profit Operating expenses Advertising expense Depreciation expense-equipment Salaries expense 35,350 4,995 4,320 10,060 8,510 20,200 1,940 7,055 2,955 17,500 1,770 Supplies expense Rent expense Utilities expense 6,000 2,560 Total operating expenses 47,205 40,660 $9,520 Net income (loss) $ (5,310) 1. Prepare a departmental contribution report that shows each department's contribution to overhead

Answer 1

Combined 185000 92925 92075 WHOLE SALE GUITARS Income Statement Showing Departemental Contribution to overhead For year Ended December 31, 2017 Acoustic Dept. Electric Dept. Sales 101900 83100 Cost of goods sold 45175 47750 Gross profit 56725 35350 Direct Expenses Depreciation expenses - equipment 100601 8510 Salaries expense 20200 17500 Supplies expenses 1940 1770 Total Direct expenses 32200 27780 Contribution to overhead 24525 7570 Indirect Expenses: Advertising expense Rent expense Utilities expense Total indirect Expenses Net income Should Guitars department elemenate or not? NO 18570 37700 3710 59980 32095 9315 13055 5515 27885 4210

Profit margin = (operating income / sales)"100 America Europe | China Operating income 24017 14225 9341 Net Sales 74139 47083 135667 Profit margin 32.4% 30.2% 26.2%