Exercise 24-7 (Static) Departmental contribution to overhead LO P3

Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss.

Departmental Income Statements
For Year Ended December 31	Acoustic	Electric
Sales	$ 112,500	$ 105,500
Cost of goods sold	55,675	66,750
Gross profit	56,825	38,750
Expenses
Advertising	8,075	6,250
DepreciationEquipment	10,150	9,000
Salaries	17,300	13,500
Supplies used	2,030	1,700
Rent	6,105	5,950
Utilities	3,045	2,550
Total expenses	46,705	38,950
Income (loss)	$ 10,120	$ (200)

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