- Bed Bath A Retailing Company Has Two Departments Hardware And Linens The Company S Most Recent Monthly Contribution 1 (29.02 KiB) Viewed 37 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 Linens Sales $ 4,180,000 $ 3,120,000 Variable expenses $ 1,060,000 1,379,000 976,000 403,000 Contribution margin 2,801,000 2,144,000 657,000 Fixed expenses 2,220,000 1,360,000 860,000 Net operating incone (loss) $ 581,000 5 784,000 $203,000) 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 14% decrease in the sales of the Hardware Department Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Answer is complete but not entirely correct. Financial (disadvantage) $ 541,450