Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,250,000 1,239,000 3,011,000 2,220,000 $ 791,000 Department Linens $ 1,140,000 417,000 723,000 870,000 Hardware $ 3,110,000 822,000 2,288,000 1,350,000 $ 938,000 $ (147,000) 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 19% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?
Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,250,000 1,239,000 3,011,000 2,220,000 $ 791,000 Department Linens $ 1,140,000 417,000 723,000 870,000 Hardware $ 3,110,000 822,000 2,288,000 1,350,000 $ 938,000 $ (147,000) 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 19% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject: accounting
Transcribed Image Text:Bed & Bath, a retailing company, has two
departments-Hardware
and Linens.
The company's most recent monthly
contribution format income statement
follows:
8:27 PM
Transcribed Image Text:Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income (loss)
Total
$ 4,250,000
1,239,000
3,011,000
2,220,000
$ 791,000
Department
Linens
Hardware
$ 3,110,000
$ 1,140,000
417,000
822,000
2,288,000
1,350,000
723,000
870,000
$ 938,000 $ (147,000)
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 19% decrease in the
sales of the Hardware Department.
Required:
What is the financial advantage (disadvantage) of discontinuing the Linens Department?
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