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Check my work 20 5 points 04:02:18 eBook Exercise 13-17 (Algo) Dropping or Retaining a Segment [LO13-2] Bed & Bath, a retailing company, has
Check my work 20 5 points 04:02:18 eBook Exercise 13-17 (Algo) Dropping or Retaining a Segment [LO13-2] 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 Fixed expenses Contribution margin Net operating income (loss) Total $ 4,340,000 1,225,000 3,115,000 2,190,000 Department Linens $ 1,150,000 416,000 734,000 840,000 Print References $ 925,000 Hardware $ 3,190,000 809,000 2,381,000 1,350,000 $ 1,031,000 $ (106,000) A study indicates that $379,000 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?
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