Exercise 12-17 Dropping or Retaining a Segment [LO12-2] Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: points 00:15:41 Department Total Hardware Linens Sales $4,270,000 $3,160,000 $1,110,000 Variable expenses 1,289,000 870,000 419,000 Contribution margin 2.981,000 2.290.000 691.000 Fixed expenses 2,290,000 1,480.000 810.000 Net operating income $ 601.000 $ 10,000 $ (119,000) (loss) eBook Print A study indicates that $374,000 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 12% decrease in the sales of the Hardware Department. Reference Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department