Bed & Bath, a retailing company, has two departmentsHardware and Linens. The companys most recent monthly contribution format income statement follows:

				Department
	Total			Hardware			Linens
Sales	$	4,230,000		$	3,050,000		$	1,180,000
Variable expenses		1,258,000			839,000			419,000
Contribution margin		2,972,000			2,211,000			761,000
Fixed expenses		2,250,000			1,440,000			810,000
Net operating income (loss)	$	722,000		$	771,000		$	(49,000	)

A study indicates that $371,000 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 19% 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 Linens Total Hardware $ 4,230,000 $ 3,050,000 $ 1,180,000 Sales Variable expenses 1,258,000 839,000 419,000 Contribution margin 2,972,000 2,211,000 761,000 Fixed expenses 2,250,000 1,440,000 810,000 722,000 $ 771,000 $ (49,000) Net operating income (loss) A study indicates that $371,000 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 19% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department