Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,230,000 1,404,000 Hardware $ 3,170,000 2,826,000 2,320,000 $ 506,000 986,000 2,184,000 1,430,000 $ 754,000 Linens $ 1,060,000 418,000 642,000 890,000 $ (248,000) A study indicates that $374,000 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 12% 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 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,230,000 1,404,000 Hardware $ 3,170,000 2,826,000 2,320,000 $ 506,000 986,000 2,184,000 1,430,000 $ 754,000 Linens $ 1,060,000 418,000 642,000 890,000 $ (248,000) A study indicates that $374,000 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 12% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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A 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?
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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
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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 $4,180,000. 1,365,000 2,815,000 2,230,000 $ 585,000 Department Hardware $ 3,080,000 963,000 2,117,000 1,340,000 $ 777,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,100,000 402,000 698,000 890,000 $(192,000) 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 13% decrease in the sales of the Hardware Department.
k ces 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 1,362,000 2,708,000 2,300,000 $ 408,000 Show All Items Department Hardware $ 3,040,000 952,000 2,088,000 1,410,000 $ 678,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? A study indicates $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 12% decrease in the sales of the Hardware Department. Linens $ 1,030,000 410,000 620,000 890,000 $ (270,000)
Bed & Bath, a retalling 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 $ 4,220,000 1,220,000 3,000,000- 2,340,000 5.660,000 Department Hardware $ 3,200,000 819,000 2,381,000 1,490,000 $ 891,000 Linens $1,020,000 401,000 619,000 850,000 $ (231,000) A study indicates $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 17% 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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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 $ 4,230,000 1,283,000 2,947,000 2,320,000 $ 627,000 Department Linens $ 1,190,000 403,000 787,000 850,000 Hardware $ 3,040,000 880,000 2,160,000 1,470,000 $ 690,000 $ (63,000) A study indicates that $374,000 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 17% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage)