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

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Bed Bath A Retailing Company Has Two Departments Hardware And Linens The Company S Most Recent Monthly Contributio 1 (37.3 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: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Department Total Hardware Linens $ 4,180,000 $3,050,000 $1,130,000 1,392,000 989,000 403,000 2,780,000 2,061,000 727,000 2,140,000 1.320,000 820,000 $ 648,000 5 741,000 $ (93,000) 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 11% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?