Answer and Explanation:
1. The preparation of the department contribution report is presented below:
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 ($8,075 + $6,250)
Rent Expenses $12,055 ($6,105 + $5,950)
Utilities Expenses $5,595 ($3,045 + $2,550)
Total indirect Expenses $31,975
Net Income $27,345 $14,550 $9,920
2. As we can see that there is a loss so electric should not be eliminated
