### Bed & Bath: Contribution Format Income Statement**Overview**Bed & Bath, a retailing company, operates two departments: Hardware and Linens. Below is the company's most recent monthly contribution format income statement.| Department | Total | Hardware | Linens ||----------------|-------------|----------|-----------|| **Sales** | $4,110,000 | $3,080,000 | $1,030,000 || **Variable Expenses** | 1,242,000 | 838,000 | 404,000 || **Contribution Margin** | 2,868,000 | 2,242,000 | 626,000 || **Fixed Expenses** | 2,260,000 | 1,420,000 | 840,000 || **Net Operating Income (Loss)** | $608,000 | $822,000 | $(214,000) |**Analysis**A study indicates that $372,000 of the fixed expenses assigned to the Linens Department are sunk costs or allocated costs that will remain even if the Linens Department is discontinued. Furthermore, eliminating the Linens Department would result in a 19% reduction in sales for the Hardware Department.**Required**Determine the financial advantage or disadvantage of discontinuing the Linens Department.

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Description: ### Bed & Bath: Contribution Format Income Statement**Overview**Bed & Bath, a retailing company, operates two departments: Hardware and Linens. Below is the company's most recent monthly contribution format income statement.| Department | Total

Relevant profit for Linens = contribution margin - avoidable fixed cost = $626000-(840000-372000) =…

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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 Linens Total Hardware $ 4,110, 000 $ 3,080, 000 $1,030, 000 404, 000 Sales Variable expenses 1, 242, 000 838, 000 Contribution margin 2,868, 000 2,242,000 626, 000 Fixed expenses 2, 260, 000 1,420, 000 840, 000 Net operating income (loss) %24 608, 000 $ 822,000 $ (214, 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 19% 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 Linens Total Hardware $ 4,110, 000 $ 3,080, 000 $1,030, 000 404, 000 Sales Variable expenses 1, 242, 000 838, 000 Contribution margin 2,868, 000 2,242,000 626, 000 Fixed expenses 2, 260, 000 1,420, 000 840, 000 Net operating income (loss) %24 608, 000 $ 822,000 $ (214, 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 19% 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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