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 $ 4,180,000 $ 3,140,000 $ 1,040,000 Variable expenses 1,321,000 912,000 409,000 Contribution margin 2,859,000 2,228,000 631,000 Fixed expenses 2,180,000 1,320,000 860,000 Net operating income (loss) $ 679,000 $ 908,000 $ (229,000 ) A study indicates that $373,000 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?

Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Department Total Hardware Linens $ 4,180,000 $3,140,000 $ 1,040,000 1,321,000 912,000 409,000 2,859,000 2,228,000 631,000 2,180,000 1,320,000 860,000 $ 679,000 $ 908,000 $ (229,000)