Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,190,000 1,359,000 2,831,000 2,250,000 $ 581,000 Department Hardware $ 3,020,000 954,000 2,066,000 1,440,000 $ 626,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,170,000 405,000 765,000 810,000 $ (45,000) A study indicates that $377,000 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 12% decrease in the sales of the Hardware Department.

Bed \& Bath, a retaling company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: A study indicotes that $377,000 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 12% decrease in the sales of the Hardware Department. Required: What is the financial advantoge (disadvantage) of discontinuing the Linens Department