Exercise 12-17 Dropping or Retaining a Segment [LO12-2] 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 Contribution margin Fixed expenses Net operating income (loss) Department Total Hardware Linens $ 4,020,000 $ 3,020,000 $1,000,000 1,265,000 855,000 410,000 2,755,000 2,165,000 590,000 2,380,000 1,490,000 890,000 $ 375,000 $ 675,000 $ (300,000) A study indicates that $373,000 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 11% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage) Exercise 12-4 Special Order Decision (L012-4) Imperial Jewelers manufactures and sells a gold bracelet for $404.00. The company's accounting system says that the unit product cost for this bracelet is $260.00 as shown below: $140 83 Direct materials Direct labor Manufacturing overhead Unit product cost $260 The members of a wedding party have approached Imperial Jewelers about buying 19 of these gold bracelets for the discounted price of $364.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $455 and that would increase the direct materials cost per bracelet by $12. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $13.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity. Required: 1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party? Financial advantage