value: 5.00 points Exercise 9-6 Departmental contribution report LO P3 Below are

ID: 2472082 • Letter: V

Question

value: 5.00 points Exercise 9-6 Departmental contribution report LO P3 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. WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2015 Electric S 112,500 $105,500 66,750 Acoustic Sales Cost of goods sold 55,675 Gross profit Operating expenses 56,825 38,750 6,250 9,000 13,500 1,700 5,950 2,550 Advertising expense Salaries expense Supplies expense Rent expense Utilities expense 8,075 10,150 17,300 2,030 6,105 3,045 Total operating expenses 46,705 38,950 Net income (loss) $ 10,120 (200)

Explanation / Answer

WHOLESALE GUITARS

Income statement showing Departmental contribution to overhead

For year Ended December 31,2015

Particulars

Acoustic Dept

Electric Dept

Combined

Sales

$ 112,500

$ 105,500

$ 218,000

Less : Cost of Goods sold

$ 55,675

$ 66,750

$ 122,425

Gross Profit

$ 56,825

$ 38,750

$ 95,575

Direct Expenses

Depreciation Expenses-Equipment

$ 10,150

$ 9,000

$ 19,150

Salaries Expenses

$ 17,300

$ 13,500

$ 30,800

Supplies Expenses

$ 2,030

$ 1,700

$ 3,730

Total Direct Expenses

$ 29,480

$ 24,200

$ 53,680

Indirect Expenses

Advertising Expenses

$ 14,325

Rent Expenses

$ 12,055

Utilities Expenses

$ 5,595

Total indirect Expenses

$ 31,975

Net Income

$ 27,345

$ 14,550

$ 9,920

No, The Electric should not elimated though there is a loss, if we close the because of fixed expenses loss will increase