Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution forma income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $4,280,000 1,305,000 2,975,000 2,310,000 $ 665,000 Department Hardware $3,130,000 893,000 2,237,000 1,420,000 $ 817,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,150,000 412,000 738,000 890,000 $ (152,000) 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 14% decrease in the sales of the Hardware Department.

Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution forma income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $4,280,000 1,305,000 2,975,000 2,310,000 $ 665,000 Department Hardware $3,130,000 893,000 2,237,000 1,420,000 $ 817,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,150,000 412,000 738,000 890,000 $ (152,000) 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 14% decrease in the sales of the Hardware Department.

Name: Bed & Bath, a retailing company, has two departments-Hardware and Lin
Uploaded: 2024-03-05T11:47:04.000Z
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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:SalesVariable expensesContribution marginFixed expensesNet operating income (loss)Total$ 4,280,00

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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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 $ 4,070,000 $ 3,000,000 $ 1,070,000 Variable expenses 1,350,000 950,000 400,000 Contribution margin 2,720,000 2,050,000 670,000 Fixed expenses 2,320,000 1,470,000 850,000 Net operating income (loss) $ 400,000 $ 580,000 $ (180,000) A study indicates $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 20% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Note* The answer is not $23,900
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 $ 4,130,000 1,358,000 2,772,000 2,200,000 $ 572,000 Department Hardware $ 3,070,000 956,000 2,114,000 1,320,000 $ 794,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,060,000 402,000 658,000 880,000 $ (222,000) 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 19% decrease in the sales of the Hardware Department.
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