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 Linens Sales $ 4,250,000 $ 3,200,000 $ 1,050,000 Variable expenses 1,368,000 952,000 416,000 Contribution margin 2,882,000 2,248,000 634,000 Fixed expenses 2,260,000 1,400,000 860,000 Net operating income (loss) $ 622,000 $ 848,000 $ (226,000 ) 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 13% decrease in the sales of the Hardware Department. Required:What is the financial advantage (disadvantage) of discontinuing the Linens Department?

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 Linens Sales $...

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	Linens
Sales	$	4,250,000		$	3,200,000	$	1,050,000
Variable expenses		1,368,000			952,000		416,000
Contribution margin		2,882,000			2,248,000		634,000
Fixed expenses		2,260,000			1,400,000		860,000
Net operating income (loss)	$	622,000		$	848,000	$	(226,000	)

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 13% decrease in the sales of the Hardware Department.

Required:

What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Jun 10, 2022

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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 Linens Sales $...

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