Chapter #13 - Homework i Saved Help Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completi Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department points Total Hardware Linens Sales $ 4, 150, 000 $ 3, 020, 000 $ 1, 130 , 000 Variable expenses 1, 230, 00 828 , 000 402, 000 Contribution margin 2, 920, 000 2, 192, 000 28 , 000 Fixed expenses 2, 230, 000 1 , 380 , 000 850, 000 Net operating income (loss) $ 690, 000 $ 812,000 $ (122, 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 19% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? x Answer is complete but not entirely correct. Financial (disadvantage) $ 631,480 X Mc Graw Hill Prev 1 of 5 Next > MacBook AirChapter #13 - Homework i Saved Help Save Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. 2 Re Futura Company purchases the 75,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.30 as shown below: points Per Unit Total Direct materials $ 5.00 Direct labor 2.20 Supervision 1 . 80 $ 135, 000 Depreciation 1 . 40 $ 105 , 000 Variable manufacturing overhead 0 . 40 Rent 0 . 50 $ 37, 500 Total product cost $ 11 .30 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $135,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $88,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: What is the financial advantage (disadvantage) of making the 75,000 starters instead of buying them from an outside supplier? x Answer is complete but not entirely correct. Financial advantage $ 52,500 X Mc Graw Hill MacBook Air