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Bed & Bath, a retailing company, has two departmentsHardwa re and Linens. The company's most recent monthly contribution format income statement follows: Departrlent Total Hardware
Bed & Bath, a retailing company, has two departmentsHardwa re and Linens. The company's most recent monthly contribution format income statement follows: Departrlent Total Hardware Linens Sales. 3; 4,666,666 $ 3,099,333 $ 1,666,666 Variable expenses 1,366,666 666,666 466,666 Contribution margin 2,?66, 666 2,166,666 666,666 Fixed expenses 2, 266,666 1,466,666 866,666 Net operating income (loss) $ 566, 666 35 7'66, 666 5 (266, 666] A study indicates that $340,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even ifthe Linens Department is dropped. In addition, the elimination ofthe Linens Department will result in a 10% decrease in the sales of the Hardware Department. Required: What is the financial advantage {disadvantage} of discontinuing the Linens Department? inancial [disadva ntage)
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