Exercise 13-17 (Algo) Dropping or Retaining a Segment [LO13-2]Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contributionformat income statement follows:DepartmentTotalHardwareLinens$ 4,130,0001,380,0002,750,000$ 3,040,000973,0002,067,000$ 1,090,000407,000SalesVariable expensesContribution marginFixed expenses683,000870,0001,350,000$ 717,0002,220,000Net operating income (loss)$ 530,000$ (187,000)A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that willcontinue 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?

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 $ 4,130,000 1,380,000 2,750,000 2,220,000 $ 3,040,000 973,000 2,067,000 1,350,000 $ 717,000 $ 1,090,000 407,000 683,000 870,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 530,000 $ (187,000) 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 11% 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: Department Total Hardware Linens $ 4,130,000 1,380,000 2,750,000 2,220,000 $ 3,040,000 973,000 2,067,000 1,350,000 $ 717,000 $ 1,090,000 407,000 683,000 870,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 530,000 $ (187,000) 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 11% 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 Fixed expenses Net operating income (loss) Total $4,250,000 1,215,000 3,035,000 2,330,000 $ 705,000 Department Hardware $ 3,100,000 803,000 2,297,000 1,480,000 $ 817,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $1,150,000 412,000 738,000 850,000 $ (112,000) 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 18% decrease in the sales of the Hardware Department.
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Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Activity Purchasing Warehousing Distributing Cost Driver Number of purchase orders Number of moves Number of shipments. Quantity of Cost Driver 1,040 8,400 540 Maximum cost Cost per Unit of Cost Driver $154 per order 34 per move 84 per shipment Caldwell buys 100,400 units at an average unit cost of $14 and sells them at an average unit price of $24. The firm also has fixed operating costs of $250,400 for the year. Caldwell's customers are demanding a 14% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 8% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 720 and can decrease the cost of each shipment by…
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Submit A retailer has two departments-Home and Garden. The company's most recent contribution format income statement follows: Total Home Garden Sales $৪00, 000 $350,000 $450,000 Variable expenses 320,000 120,000 200,000 Contribution margin Fixed expenses 480,000 230,000 250,000 400,000 140,000 260,000 35:51 Net operating income (1loss) $ 80,000 $ 90,000 $(10,000) The retailer is considering whether It should close the Garden Department. Further analysis revealed that, of the fixed expenses being charged to the Garden Department, $140,000 are sunk costs or allocated costs that will continue If Garden is discontinued. In addition, If the Garden Department is discontinued, sales in the Home Department will drop by 5%. How much does the company's profit increase or decrease if the Garden Department is discontinued? (If a decrease, the dollar amount is indicated in parentheses, ie., $ (1,000).) Multiple Cholce $ (124,000) O Quiz $ (161,500) 1009
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 Fixed expenses Contribution margin Net operating income (loss) 1,307,000 Department Total $ 4,210,000 Hardware $ 3,040,000 Linens $ 1,170,000 403,000 767,000 840,000 $ (73,000) 2,903,000 2,290,000 $ 613,000 904,000 2,136,000 1,450,000 $ 686,000 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 15% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage)
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Cost Driver Number of purchase orders Number of moves Distributing Number of shipments Activity Purchasing Warehousing Quantity of Cost Driver 1,200 8,900 700 Cost per Unit of Cost Driver $170 per order 39 per move 100 per shipment Caldwell buys 102,000 units at an average unit cost of $19 and sells them at an average unit price of $29. The firm also has fixed operating costs of $252,000 for the year. Maximum cost Caldwell's customers are demanding a 19% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 13% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 880 and can decrease the cost of each shipment by…
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…
Macee Store has three operating departments, and it conducts advertising that benefits all departments. Advertising costs are $110,000. Sales for its operating departments follow. Department Sales 1 $ 247,500 2 455,400 3 287, 100 How much advertising cost is allocated to each operating department if the allocation is based on departmental sales? Note: Do not round your intermediate calculations.
Restate the following income statement for a retailer in contribution format. Sales revenue ($100 per unit) $ 70,000 Less cost of goods sold ($58 per unit) 40,600 Gross margin 29,400 Less operating costs: Commissions expense ($6 per unit) $ 4,200 Salaries expense 7,900 Advertising expense 5,900 Shipping expense ($1 per unit) 700 18,700 Operating income $ 10,700 Per Unit select an income statement item $enter a dollar amount $enter a dollar amount select an opening name for section one : select an income statement item $enter a dollar amount enter a dollar amount select an income statement item…
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)