Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly...
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Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department Total Hardware $ 3,170,000 Sales Variable expenses $ 4,370,000 1,278,000 3,092,000 2,150,000 Linens $ 1,200,000 400,000 800,000 810,000 878,000 2,292,000 1,340,000 Contribution margin Fixed expenses Net operating income (loss) $ 942,000 $ 952,000 $ (10,000) A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 14% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage) Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department Total Hardware $ 3,170,000 Sales Variable expenses $ 4,370,000 1,278,000 3,092,000 2,150,000 Linens $ 1,200,000 400,000 800,000 810,000 878,000 2,292,000 1,340,000 Contribution margin Fixed expenses Net operating income (loss) $ 942,000 $ 952,000 $ (10,000) A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 14% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage)
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Solution Financial Disadvantage 689880 Working Net income Earlier 942000 Net ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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