Below are departmental income statements for a guitar manufacturer. 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.

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, 2017 Acoustlc Electric Sales. Cost of goods sold. Gross profit Operating expenses 112,500 $105,500 66,750 38,750 55,675 56,825 8,075 10,150 17,300 2,030 6,105 6,250 9,000 13,500 I,P00 5,950 250 Rent expense. Utilities expense 46,705 Net Income (loss) _.. .. $10,120 (200)