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 $ 4,090,000 1,361,000 2,729,000 2,240,000 $ 489,000 Financial (disadvantage) Department Hardware $ 3,060,000 951,000 2,109,000 1,340,000 $ 769,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? 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 13% decrease in the sales of the Hardware Department. Linens $ 1,030,000 410,000 620,000 900,000 $ (280,000)

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 $ 4,090,000 1,361,000 2,729,000 2,240,000 $ 489,000 Financial (disadvantage) Department Hardware $ 3,060,000 951,000 2,109,000 1,340,000 $ 769,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? 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 13% decrease in the sales of the Hardware Department. Linens $ 1,030,000 410,000 620,000 900,000 $ (280,000)

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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