Below are departmental income statements for a guitar manufacturer. The manufacturer is considering dropping its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect.

1. Prepare a departmental contribution report that shows each department's contribution to overhead.
2. Based on contribution to overhead, should the electric guitar department be eliminated?

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WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31,2015 AcousticElectric Sales Cost of goods sold Gross profit Operating expenses $12,500 $105,500 55,675 66.750 38,750 56,825 Advertising expense. Depreciation expense-equipment Salaries expense Supplies expense Rent expense Utilities expense. 8,075 10,150 17,300 2,030 6,105 3,045 6,250 9,000 3,500 1,700 5,950 Total operating expenses Net income (loss) 4670538950 ($200) 10,120