Question 2: Bed and Bath, a retailing company has two departments, Hardware and Linens. The company's most recentmonthly contribution format income statement is given below:DepartmentTotalHardwareLinensSales$40,00,000$30,00,000$10,00,000Variable expenses13,00,0009,00,0004,00,000Contribution MarginFixed expenses21,00,00014,00,000$700,000600,00027,00,00022,00,000$5,00,000800,000($200,000)Net Operating IncomeA study indicates that, $340,000 of the fixed expenses charged to Lines are sunk costs or allocated cost that will continue toincur even if the Linens department is dropped. In addition, the elimination of the Lines department will result in a 10% increasein the sales of the Hardware department.Required : If the Linens Department is dropped, what will be the effect on the net operating income of the company as awhole?[

The decision on whether to keep or drop the unprofitable segment, division , department is based on…

Question 2: Bed and Bath, a retailing company has two departments, Hardware and Linens. The company's most recent monthly contribution format income statement is given below: Department Total Hardware Linens Sales $40,00,000 $30,00,000 $10,00,000 Variable expenses 13,00,000 27,00,000 22,00,000 $5,00,000 9,00,000 4,00,000 Contribution Margin Fixed expenses 21,00,000 600,000 14,00,000 800,000 Net Operating Income $700,000 ($200,000) A study indicates that, $340,000 of the fixed expenses charged to Lines are sunk costs or allocated cost that will continue to incur even if the Linens department is dropped. In addition, the elimination of the Lines department will result in a 10% increase in the sales of the Hardware department. Required : If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole?[