Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatincome statement follows:DepartmentHardware$ 3,040,000Linens$ 1,030,000SalesVariable expenses418,000Total$ 4,070,0001,318,000:2,752,0002,300,000$ 452,000Contribution margin612,000900,0002,140,0001,420,000$ 720,000Fixed expenses880,000Het operating income (loss)$(268,000)A study indicates that $378,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continueeven if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 16% decrease in thesales of the Hardware Department.Required:What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Name: Bed & Bath, a retailing company, has two departments-Hardware and Lin
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Description: Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatincome statement follows:DepartmentHardware$ 3,040,000Linens$ 1,030,000SalesVariable expenses418,000Total$ 4,070,0001,318,

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Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department Bardvare $ 3,040,000 Sales Variable expenses Total $ 4,070,000 1,318,000 2,752,000 2,300,000 Linens $ 1,030,000 418,000 612,000 880,000 900,000 2,140,000 1,420,000 Contribution margin Fixed expenses Set operating income (loss) $452,000 $ 720,000 $ (268,000) A study indicates that $378,000 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 16% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department Bardvare $ 3,040,000 Sales Variable expenses Total $ 4,070,000 1,318,000 2,752,000 2,300,000 Linens $ 1,030,000 418,000 612,000 880,000 900,000 2,140,000 1,420,000 Contribution margin Fixed expenses Set operating income (loss) $452,000 $ 720,000 $ (268,000) A study indicates that $378,000 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 16% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Total Department Hardware Linens Sales S 4,210,000 S 3,120,000 $ 1,090,000 Variable expenses 1,299,000 889,000 410, 000 Contribution margin 2,911,000 2,231,000 680,000 Fixed expenses 2,220,000 1,400,000 820,000 Net operating income (loss) $ 691,000 S 831,000 S (140,000) A study indicates that S 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 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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