s 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 formatincome statement follows:SalesVariable expensesContribution margin.Fixed expensesNet operating income (loss)Total$ 4,210,0001,330,0002,880,0002,190,000$ 690,000DepartmentHardware$ 3,090,000912,0002,178,0001,330,000$ 848,000Required:What is the financial advantage (disadvantage) of discontinuing the Linens Department?Linens$ 1,120,000418,000702,000860,000$ (158,000)A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continueeven if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 12% decrease in thesales of the Hardware Department.

Lets understand the basics.When decision is required to make between whether to continue department…

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

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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