Bed & Bath, a retailing company, has two departments, Hardware and Linens. The c

Question

Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent monthly contribution format income statement follows:

Department

A study indicates that $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 14% decrease in the sales of the Hardware Department.

If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole?

1. Decrease in net operating income ____

Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent monthly contribution format income statement follows:

Explanation / Answer

There will be overall loss in proifit of 433540 as contribution loss is more then avoidable fixed expenses

Contribution :Loss Linens 617000 Contribution :Loss Hardware 323540 (2311000 x 14%) Total Contribution :Loss 940540 Avoidable fixed cost 507000 Decrease in net operating income 433540

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.