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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BEST GUITAR Departmental Income Statements For Year Ended December 31,2011 Acoustic Electric Sales Cost of goods sold $101,500 $85,000 46.750 .55,825 38.250 45,675 . Operating expenses Advertising expense 5,075 4.250 0,50 8,500 20,300 7,000 2,030 1.700 7,105 5.950 3,0452,550 47,705 39,950 $8,120 ($I,700) Salarles expense Supples expense Rent expense. expense Total operating expenses Net income (loss) ..