Luxury Linens has three departments: Bath, Kitchen, and Bedding. The most recent income statement, showing the total operating profit and departmental results is shown below: Total Bath Kitchen Bedding Sales $2,100,000 $1,000,000 $500,000 $600,000 Cost of goods sold (1,260,000) (500,000) (360,000) (400,000) Gross profit 840,000 500,000 140,000 200,000 Direct expenses (420,000) (200,000) (120,000) (100,000) Allocated expenses (325,000) (100,000) (150,000) (75,000) Net income (loss) $95,000 $200,000 ($130,000) $25,000 Based on this income statement, management is considering eliminating the Kitchen department. If the Kitchen department is eliminated, the other departments will expand to fill the space but sales are not expected to change. Twenty percent of Kitchen's allocated expenses will be avoided due to restructuring and the remainder reallocated equally to Bath and Bedding. Part 1. Show an analysis indicating whether the Kitchen department should be eliminated. You may use the template below. Hint: There are at three types of costs that are currently being incurred related to the Kitchen department that will be avoidable. You must calculate the amount of each cost item and list the name of the cost and the amount as part of your analysis below. (4 points). Kitchen Sales lost $ Avoidable costs: 1) 2) 3) -------------------------- Net impact on net income (Sales loss plus cost savings). $ =============== Part 2. Should the Kitchen Department be eliminated and WHY? (1 point).