Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department Total Linens Sales Hardvare $3,000,000 $ 1,120,000 Variable expenses $ 4,120,000 1,278,000 2,842,000 859,000 419,000 Contribution margin Pixed expenses 2,141,000 2,220,000 701,000 830,000 1,390,000 Net operating income (loss) $622,000 $751,000 $(129,000) A study indicates that $376,000 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 15% 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 Total Linens Sales Hardvare $3,000,000 $ 1,120,000 Variable expenses $ 4,120,000 1,278,000 2,842,000 859,000 419,000 Contribution margin Pixed expenses 2,141,000 2,220,000 701,000 830,000 1,390,000 Net operating income (loss) $622,000 $751,000 $(129,000) A study indicates that $376,000 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 15% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Name: Bed & Bath, a retailing company, has two departments-Hardware and Lin
Uploaded: 2024-03-20T06:32:49.000Z
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Description: Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatincome statement follows:DepartmentTotalLinensSalesHardware$3,000,000Variable expenses$ 1,120,000419,000$ 4,120,0001,278,0

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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Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,300,000 $ 3,150,000 $ 1,150,000 Variable expenses 1,311,000 909,000 402,000 Contribution margin 2,989,000 2,241,000 748,000 Fixed expenses 2,150,000 1,330,000 820,000 Net operating income (loss) $ 839,000 $ 911,000 $ (72,000 ) 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 17% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?
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