Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution formatincome statement follows:SalesVariable expensesContribution marginFixed expensesNet operating income (loss)DepartmentTotal$ 4,170,000Hardware$ 3,010,000Linens$ 1,160,000407,000753,0001,325,0002,845,0002,290,000$ 555,000918,0002,092,0001,470,000$ 622,000820,000$ (67,000)A study indicates $376,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even ifthe Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 17% decrease in the sales of theHardware Department.Required:What is the financial advantage (disadvantage) of discontinuing the Linens Department?

Total contribution margin lost is to be compqred with total saving in fixed cost due to…

d & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format come statement follows: Sales Wariable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,170,000 1,325,000 2,845,000 2,290,000 $ 555,000 Department Hardware Linens $ 3,010,000 $ 1,160,000 407,000 918,000 2,092,000 1,470,000 753,000 820,000 $ 622,000 $ (67,000) study indicates $376,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if e Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 17% decrease in the sales of the rdware Department. quired: hat is the financial advantage (disadvantage) of discontinuing the Linens Department?

d & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format come statement follows: Sales Wariable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,170,000 1,325,000 2,845,000 2,290,000 $ 555,000 Department Hardware Linens $ 3,010,000 $ 1,160,000 407,000 918,000 2,092,000 1,470,000 753,000 820,000 $ 622,000 $ (67,000) study indicates $376,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if e Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 17% decrease in the sales of the rdware Department. quired: hat 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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k ces 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) Total $ 4,070,000 1,362,000 2,708,000 2,300,000 $ 408,000 Show All Items Department Hardware $ 3,040,000 952,000 2,088,000 1,410,000 $ 678,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? A study indicates $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 12% decrease in the sales of the Hardware Department. Linens $ 1,030,000 410,000 620,000 890,000 $ (270,000)
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