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 beeliminated?

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WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2013 Acoustic Electric Cost of goods sold.. Gross profit Operating expenses 55,675 66750 56.825 38,750 8,075 10.150 17300 13,500 2,030 6,105 3.045 Advertising expense Depreciation expense-equipment Salaries expense 6.250 9,000 ense...O.. I,700 5.950 2,550 38,950 Rent expense Total operating expenses.46,705 Net income (loss) . $10,120