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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 Hardware $4,180,000
Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company's most recent monthly contribution format income statement follows Department Hardware $4,180,000 $3,170,000 1,010,000 978,000 2,192,000 1,360,000 $ 602,000 S832,000 S (230,000) Total Linens Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) 1,388,000 2,792,000 2,190,000 410,000 600,000 830,000 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 11% decrease in the sales of the Hardware Department. Required If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole? ease in net operating income
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