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

[answerhappygod]

Bed Bath A Retailing Company Has Two Departments Hardware And Linens The Company S Most Recent Monthly Contribution 1 (25.54 KiB) Viewed 49 times

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 Linen Sales $ 4,390,000 $3,190,000 $ 1,200,000 Variable expenses 1,361,000 955,000 406,000 Contribution margin 3,029,000 2,235,000 794,000 Fixed expenses 2,280,000 1,440,000 840,000 Net operating income (loss) $ 749,000 $ 795,000 $(46,000) A study indicates that $372,000 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 20% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?