Bed & Bath, a retalling company, has two departments-Hardware and Linens. The company's most recent monthly...

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Bed & Bath, a retalling company, has two departments-Hardware and Linens. The company's most recent monthly contribution format Income statement follows: Sales Variable expenses. Contribution margin Fixed expenses Net operating income (loss) Total $ 4,120,000 1,247,000 2,873,000 2,220,000 S 653,000 Department Hardware $ 3,030,000 841,000 2,189,000 1,350,000 $ 839,000 Linens $ 1,090,000 406,000 684,000 $70,000 $(186,000) A study indicates that $371,000 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 13% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Bed & Bath, a retalling company, has two departments-Hardware and Linens. The company's most recent monthly contribution format Income statement follows: Sales Variable expenses. Contribution margin Fixed expenses Net operating income (loss) Total $ 4,120,000 1,247,000 2,873,000 2,220,000 S 653,000 Department Hardware $ 3,030,000 841,000 2,189,000 1,350,000 $ 839,000 Linens $ 1,090,000 406,000 684,000 $70,000 $(186,000) A study indicates that $371,000 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 13% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Answer rating: 100% (QA)

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