Question: Please answer thanks!! Bed & Bath, a retailing company, has two departmentsHardware and Linens. The company's most recent monthly contribution format income statement follows: Sales
Please answer thanks!!
Bed & Bath, a retailing company, has two departmentsHardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Department Total Hardware Linens $ 4,240,000 $3,110,000 $ 1,130,000 1,284,000 874,000 410,000 2,956,000 2,236,000 720,000 2,290,000 1,430,000 860,000 Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 666,000 $ 806,000 $ (140,000) A study indicates that $378,000 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 19% 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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