Bed & Bath, a retailing
company, has two
departments—Hardware and Linens. The
company’s most recent monthly
contribution format income
statement follows:
- Bed Bath A Retailing Company Has Two Departments Hardware And Linens The Company S Most Recent Monthly Contribution 1 (121.92 KiB) Viewed 36 times
Bed & Bath, a retailing
company, has two departments-Hardware and Linens. The
company's most recent monthly contribution form income
statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,330,000 1, 242,000 3,088,000 2,160,000 $ 928,000 Department Hardware Linens $ 3,190,000 $ 1,140,000 839,000 403,000 2,351,000 737,000 1,310,000 850,000 $ 1,041,000 $ (113,000) A study indicates that $380,000 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 17% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage) $ (572,360)