question archive Bed & Bath, a retailing company, has two departments-Hardware and Linens
Bed & Bath, a retailing company, has two departments-Hardware and Linens
Subject:BusinessPrice: Bought3
Bed & Bath, a retailing 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 $ 4,180,000 1,373,000 2,807,000 2,160,000 $ 647,000 Department Hardware Linens $ 3,170,000 $ 1,010,000 968,000 405,000 2,202,000 605,000 1,360,000 800,000 $ 842,000 $ (195,000) A study indicates that $376,000 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 11% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing Linens Department?
