Below
are departmental income statements for a guitar manufacturer. The manufacturer
is considering dropping its electric guitar department since it has a net loss.
E21-3
Departmental contribution report
E21-3
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?
BEST GUITAR
Departmental Income Statements
For Year Ended December 31, 2011
Acoustic Electric
Sales . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $101,500
$85,000
Cost of goods sold . . . . . .
. . . . . . . . . . . . . . 45,675
46,750
Gross profit . . . . . . . . .
. . . . . . . . . . . . . . . . . 55,825
38,250
Operating expenses
Advertising expense . . . . . . . . . . . . . . . . . . 5,075 4,250
Depreciation expense‐equipment . . . . . . . 10,150 8,500
Salaries expense . . . . . . . . . . . . . . . . . . . . . 20,300 17,000
Supplies expense . . . . . . . . . . . . . . . . . . . . 2,030 1,700
Rent expense . . . . . . . . . . . . . . . . . . . . . . . 7,105 5,950
Utilities expense . . . . . . . . . . . . . . . . . . . . . 3,045 2,550
Total operating expenses . . .
. . . . . . . . . . . . . 47,705
39,950
Net income (loss) . . . . . . . . . . . . . . .
. . . . $ 8,120 ($1,700)
BEST GUITAR
Departmental Contribution
Statements
For Year Ended December 31, 2011
|
|
Acoustic
|
Electric
|
|
|
|
Dept.
|
Dept.
|
Combined
|
|
Sales
|
$ 101,500
|
$85,000
|
$ 186,500
|
|
Cost of
goods sold
|
45,675
|
46,750
|
92,425
|
|
Gross
profit
|
55,825
|
38,250
|
94,075
|
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