Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatincome statement follows:DepartmentHardware$ 3,040,000Linens$ 1,030,000SalesVariable expenses418,000Total$ 4,070,0001,318,000:2,752,0002,300,000$ 452,000Contribution margin612,000900,0002,140,0001,420,000$ 720,000Fixed expenses880,000Het operating income (loss)$(268,000)A study indicates that $378,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continueeven if the Linens Department is dropped. In addition, 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?

Name: Bed & Bath, a retailing company, has two departments-Hardware and Lin
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Description: Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatincome statement follows:DepartmentHardware$ 3,040,000Linens$ 1,030,000SalesVariable expenses418,000Total$ 4,070,0001,318,

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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: Department Bardvare $ 3,040,000 Sales Variable expenses Total $ 4,070,000 1,318,000 2,752,000 2,300,000 Linens $ 1,030,000 418,000 612,000 880,000 900,000 2,140,000 1,420,000 Contribution margin Fixed expenses Set operating income (loss) $452,000 $ 720,000 $ (268,000) A study indicates that $378,000 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 16% 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 Bardvare $ 3,040,000 Sales Variable expenses Total $ 4,070,000 1,318,000 2,752,000 2,300,000 Linens $ 1,030,000 418,000 612,000 880,000 900,000 2,140,000 1,420,000 Contribution margin Fixed expenses Set operating income (loss) $452,000 $ 720,000 $ (268,000) A study indicates that $378,000 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 16% 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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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)
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