Department

Total Hardware Linens

Sales $4,280,000 $3,100,000 $1,180,000

Variable Expenses $1,340,000 $925,000 $415,000

Contribution Margin $2,940,000 $2,175,000 $765,000

Fixed Expenses $2,170,000 $1,340,000 $830,000

Net Operating Income (Loss) $770,000 $835,000 $(65,000)

$374,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. The elimination of the Linens Department will result in a 16% decrease in the sales of the Hardware Department.

What is the financial advantage (disadvantage) of discontinuing the Linens Department?