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Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric
22 Quiz You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain
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Answer #1
1 WHOLESALE GUITARS
Income Statement Showing Departmental Contribution to Overhead
For Year Ended December 31, 2015
Acoustic Dept. Electric Dept. Combined
Sales $103,300 $84,900 $188,200
Cost of goods sold 45,375 47,750 $93,125
Gross profit 57,925 37,150 $95,075
Direct expenses:
Salaries expense 19,400 17,500 $36,900
Depreciation expense—equipment 10,120 8,530 18,650
Supplies expense 1,940 1,770 3,710
Total direct expenses 31,460 27,800 59,260
Departmental contributions to overhead 26,465 9,350 35,815
Indirect expenses:
Rent expense 7095 6030 13,125
Utilities expense 2955 2610 5,565
Advertising expense 5055 4260 9,315
Total indirect expenses 15105 12900 28,005
Net income 11,360 -3,550 7,810
2 No, Electric deparment should not be removed as it has departmental contribution of $9,350.
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