Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: TotalDepartment Hardware Linens Sales $ 4,260, 000 $ 3, 130,000 $ 1,130,000 Variable expenses 1, 240,000 839,000 401,000 Contribution margin3,020,000 2,291, 000 729,000 Fixed expenses 2,160,000 1,350,000 810, 000 Net operating income (loss) $ 860, 000 $ 941, 000 $ (81, 000) A study indicates that $375,000of 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 ofthe Linens Department will result in a 13% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing theLinens Department?

If the segment is discontinued, there may be contractual obligations, depreciation, and other costs…

Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Total Department Hardware Linens Sales $ 4,260, 000 $ 3, 130,000 S 1, 130, 000 Variable expenses 1, 240, 000 839,000 401,000 Contribution margin 3,020,000 2,291, 000 729,000 Fixed expenses 2,160,000 1,350,000 810, 000 Net operating income (loss) $ 860, 000 $ 941, 000 S (81, 000) A study indicates that $375,000 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 13% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Total Department Hardware Linens Sales $ 4,260, 000 $ 3, 130,000 S 1, 130, 000 Variable expenses 1, 240, 000 839,000 401,000 Contribution margin 3,020,000 2,291, 000 729,000 Fixed expenses 2,160,000 1,350,000 810, 000 Net operating income (loss) $ 860, 000 $ 941, 000 S (81, 000) A study indicates that $375,000 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 13% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens 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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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 Net operating income (loss) Fixed expenses Total $ 4,290,000 1,286,000 3,004,000 2,370,000 $ 634,000 Department Linens $ 1,190,000 418,000 772,000 880,000 Hardware $ 3,100,000 868,000 2,232,000 1,490,000 $ 742,000 $ (108,000) A study indicates that $377,000 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 13% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage) $ 390,100
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) Total $ 4,070,000 1,273,000 2,797,000 2,220,000 $ 577,000 Financial (disadvantage) I Department Hardware $ 3,060,000 870,000 2,190,000 1,370,000 $ 820,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? 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 18% decrease in the sales of the Hardware Department. Linens $ 1,010,000 403,000 607,000 850,000 $ (243,000)
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Tike Industries is an apparel company that makes and sells both casual wear and sportswear. Here are data for the current year: Sales revenue Variable costs Contribution margin Traceable fixed costs Segment margin Common fixed costs Operating income Total $ 1,000,000 745,000 $255.000 (80,000) $175,000 (90,000) $85,000 Casual wear $ 450,000 388,000 $62,000 (25,000) $37,000 (42,000) S(5,000) Sportswear 5 pts $ 550,000 357,000 $193,000 (55,000) $138,000 (48,000) $90,000 Tike's accountant allocated the common fixed costs between the product lines based on sales revenue. Tike plans to discontinue the production of casual wear and use the freed-up capacity to triple the production and sale of sportswear. Although this will eliminate the traceable fixed costs for casual wear, the traceable fixed costs for sportswear will double. If Tike discontinues the casual wear product line, what would be the amount of the increase in Tike's operating income? Round to the nearest whole dollar and do not…
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) Total $ 4,310,000 1,313,000 2,997,000 2,200,000 $ 797,000 Department Hardware $ 3,130,000 901,000 2,229,000 1,360,000 $ 869,000 Linens $ 1,180,000 412,000 768,000 840,000 $ (72,000) A study indicates that $377,000 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? Financial (disadvantage)
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