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Bed & Bath, a retailing company, has two departmentsiHardware and Linens. The company's most recent monthly contribution format income statement follows: Department Total Hardware Linens
Bed & Bath, a retailing company, has two departmentsiHardware and Linens. The company's most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales 5 4,290,000 $ 3,130,000 $ 1,160,000 Variable expenses 1,331,000 92?,000 404,000 Contribution margin 2,959,000 2,203,000 756,000 Fixed expenses 2,230,000 1,370,000 060,000 Net operating income (loss) 55 729,000 $ 833,000 5 (104,000) A study indicates that $379000 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 ofthe Linens Department will result in a 14% decrease in the sales ofthe Hardware Department. aquired: hat is the financial advantage (disadvantage) of discontinuing the Linens Department
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