Question: Linens Sales Variable expenses Contribution margin Tixed expenses Net operating income (loss) Total Hardware $ 4,220,000 $3,110,000 $1,110,000 1,304,000 899.000 405,000 2,916,000 2,211,000 705,000 2,260,000
Linens Sales Variable expenses Contribution margin Tixed expenses Net operating income (loss) Total Hardware $ 4,220,000 $3,110,000 $1,110,000 1,304,000 899.000 405,000 2,916,000 2,211,000 705,000 2,260,000 1,430,000 830,000 $ 656,000 $ 781,000 $ (125,000) 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 15% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department
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