Exercise 13-17 (Algo) Dropping or Retaining a Segment [LO13-2] 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 Total $ 4,210,000 1,330,000 2,880,000 2,190,000 $ 690,000 Department Hardware $ 3,090,000 912,000 2,178,000 1,330,000 $ 848,000 Linens $ 1,120,000 418,000 702,000 860,000 $ (158,000) Fixed expenses Net operating income (loss) A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue
Exercise 13-17 (Algo) Dropping or Retaining a Segment [LO13-2] 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 Total $ 4,210,000 1,330,000 2,880,000 2,190,000 $ 690,000 Department Hardware $ 3,090,000 912,000 2,178,000 1,330,000 $ 848,000 Linens $ 1,120,000 418,000 702,000 860,000 $ (158,000) Fixed expenses Net operating income (loss) A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue
Chapter1: Financial Statements And Business Decisions
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![Exercise 13-17 (Algo) Dropping or Retaining a Segment [LO13-2]
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
$ 4,210,000
1,330,000
2,880,000
2,190,000
$ 690,000
Department
Hardware
$ 3,090,000
912,000
2,178,000
1,330,000
$ 848,000
Required:
What is the financial advantage (disadvantage) of discontinuing the Linens Department?
Linens
$ 1,120,000
418,000
702,000
860,000
$ (158,000)
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 12% decrease in the
sales of the Hardware Department.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd368279c-9e79-41b1-b6f0-c2d5c301fc3d%2Fe95f519e-eab6-43c6-ac1b-adab662f535e%2Ft9wicwk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 13-17 (Algo) Dropping or Retaining a Segment [LO13-2]
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
$ 4,210,000
1,330,000
2,880,000
2,190,000
$ 690,000
Department
Hardware
$ 3,090,000
912,000
2,178,000
1,330,000
$ 848,000
Required:
What is the financial advantage (disadvantage) of discontinuing the Linens Department?
Linens
$ 1,120,000
418,000
702,000
860,000
$ (158,000)
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 12% decrease in the
sales of the Hardware Department.
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