Bed & Bath, a retailing company, has two departments-Hardware and Linens. Thecompany's most recent monthly contribution format income statement follows:SalesVariable expensesContribution marginFixed expensesNet operating income (loss)Total$ 4,160,0001,252,0002,908,0002,280,000$ 628,000DepartmentHardware$ 3,140,000849,0002,291,0001,400,000$ 891,000Linens$ 1,020,000403,000617,000880,000$ (263,000)A study indicates that $373,000 of the fixed expenses being charged to Linens are sunkcosts or allocated costs that will continue even if the Linens Department is dropped. Inaddition, the elimination of the Linens Department will result in a 16% decrease in thesales of the Hardware Department.Required:What is the financial advantage (disadvantage) of discontinuing the Linens Department?

In accounting the closing down of a department or a product line of a business is considered as…

Bed & Bath, a retailing company, has two departments-Hardware and Linens. company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $4,160,000 1,252,000 2,908,000 2,280,000 $628,000 Department Hardware $ 3,140,000 849,000 2,291,000 1,400,000 Linens $ 1,020,000 403,000 617,000 880,000 $ 891,000 $ (263,000) A study indicates that $373,000 of the fixed expenses being charged to Linens a costs or allocated costs that will continue even if the Linens Department is dropp addition, the elimination of the Linens Department will result in a 16% decrease sales of the Hardware Department.

Bed & Bath, a retailing company, has two departments-Hardware and Linens. company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $4,160,000 1,252,000 2,908,000 2,280,000 $628,000 Department Hardware $ 3,140,000 849,000 2,291,000 1,400,000 Linens $ 1,020,000 403,000 617,000 880,000 $ 891,000 $ (263,000) A study indicates that $373,000 of the fixed expenses being charged to Linens a costs or allocated costs that will continue even if the Linens Department is dropp addition, the elimination of the Linens Department will result in a 16% decrease sales of the Hardware Department.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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