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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 Linens Total Hardware
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 4,250,000 $ 3,110,000 s 1,140,000 Sales Variable expenses 907,000 1,312,000 405,000 Contribution margin 2,203,000 2,938,000 735,000 Fixed expenses 840,000 1,470,000 2,310,000 628,000 $ (105,000) Net operating income (loss) 733,000 A study indicates that $376,000 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 18% decrease in the sales of the Hardware Department Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department
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