Bed & Bath, a retailing company, has two departments$-$Hardware and Linens. The company's most recent monthly contribution format

income statement follows:

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 $14\%$ decrease in the

sales of the Hardware Department.

Requlred:

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:

Total Department

Hardware Linens

Sales $ $4,170,000$ $ $3,040,000$ $ $1,130,000$

Variable expenses $1,215,000809,000406,000$

Contribution margin $2,955,0002,231,000724,000$

Fixed expenses $2,270,0001,420,000850,000$

Net operating income $($loss$)$ $ $685,000$ $ $811,000$ $ $(126,000)$

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 $14\%$ decrease in the sales of the Hardware Department.