Bed & Bath, a retailing company, has two departments-Hardware and Linens. Thecompany's most recent monthly contribution format income statement follows:SalesVariable expensesContribution marginFixed expensesNet operating income (loss)Total$ 4,160,0001,252,0002,908,0002,280,000$ 628,000DepartmentHardware$ 3,140,000849,0002,291,0001,400,000$ 891,000Linens$ 1,020,000403,000617,000880,000$ (263,000)A study indicates that $373,000 of the fixed expenses being charged to Linens are sunkcosts or allocated costs that will continue even if the Linens Department is dropped. Inaddition, the elimination of the Linens Department will result in a 16% decrease in thesales of the Hardware Department.Required:What is the financial advantage (disadvantage) of discontinuing the Linens Department?

In accounting the closing down of a department or a product line of a business is considered as…

Bed & Bath, a retailing company, has two departments-Hardware and Linens. company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $4,160,000 1,252,000 2,908,000 2,280,000 $628,000 Department Hardware $ 3,140,000 849,000 2,291,000 1,400,000 Linens $ 1,020,000 403,000 617,000 880,000 $ 891,000 $ (263,000) A study indicates that $373,000 of the fixed expenses being charged to Linens a costs or allocated costs that will continue even if the Linens Department is dropp addition, the elimination of the Linens Department will result in a 16% decrease sales of the Hardware Department.

Bed & Bath, a retailing company, has two departments-Hardware and Linens. company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $4,160,000 1,252,000 2,908,000 2,280,000 $628,000 Department Hardware $ 3,140,000 849,000 2,291,000 1,400,000 Linens $ 1,020,000 403,000 617,000 880,000 $ 891,000 $ (263,000) A study indicates that $373,000 of the fixed expenses being charged to Linens a costs or allocated costs that will continue even if the Linens Department is dropp addition, the elimination of the Linens Department will result in a 16% decrease sales of the Hardware 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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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 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.
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