Bed & Bath, a retaling company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatIncome statement follows:DepartnentLinens$ 4, 290,000 $ 3,130,000 $ 1,160,000414, 000TotalHardwaresalesvariable expenses1,364,00095e, eeeContribution marginFixed expenses2,926, 0002,160, 0002,180, e001,318, eee870, 000 s (104, eee)746, 00085e, e00Net operating incone (loss)766,000 $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 ellmination of the Linens Department will result in a 14% decrease in thesales of the Hardware Department.Required:What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Name: Bed & Bath, a retaling company, has two departments-Hardware and Line
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Description: Bed & Bath, a retaling company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatIncome statement follows:DepartnentLinens$ 4, 290,000 $ 3,130,000 $ 1,160,000414, 000TotalHardwaresalesvariable expenses1,3

SOLUTION- CONTRIBUTION IS THE AMOUNT OF EARNINGS REMAINING AFTER ALL DIRECTS COST HAVE BEEN…

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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: Departnent Total Hardware Linens $ 4,290, 000 S 3,130,000 S 1,160, 000 95e, 000 2,180, e00 1,310,000 sales 1,364,000 2,926, 00 variable expenses 414, 000 746,000 850,000 Contribution nargin Fixed expenses 2,160,000 Net operating incone (loss) 766,000 S 870,000 s (104,000) 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 14% 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: Departnent Total Hardware Linens $ 4,290, 000 S 3,130,000 S 1,160, 000 95e, 000 2,180, e00 1,310,000 sales 1,364,000 2,926, 00 variable expenses 414, 000 746,000 850,000 Contribution nargin Fixed expenses 2,160,000 Net operating incone (loss) 766,000 S 870,000 s (104,000) 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 14% 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 recentmonthly contribution format income statement follows:DepartmentTotal Hardware LinensSales ................................................ $4,000,000 $3,000,000 $1,000,000Variable expenses ........................... 1,300,000 900,000 400,000Contribution margin .......................... 2,700,000 2,100,000 600,000Fixed expenses ................................ 2,200,000 1,400,000 800,000Net operating income (loss) ............. $ 500,000 $ 700,000 $ (200,000)A study indicates that $340,000 of the fixed expenses being charged to Linens are sunk costs or allocatedcosts that will continue even if the Linens Department is dropped. In addition, the elimination of the LinensDepartment will result in a 10% decrease in the sales of the Hardware Department.Required:If the Linens Department is dropped, what will be the effect on the net operating income of the companyas a whole?
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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