Managerial Accounting

Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows Department Total Hardware Linens Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $4,320,000 $ 3,140,000 $ 1,180,000 420,000 760,000 810,000 1,273,000e 3,047,000 2, 287,000 2,150,000 1, 340,000 853,000 $ 897,000 $ 947,000 $(50,000) A study indicates that $376,000 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 17% decrease in the sales of the Hardware Department. Required What is the financial advantage (disadvantage) of discontinuing the Linens Department? Answer is not complete. Financial (disadvantage)