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

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

Bed & Bath- Hardware Department If the Linens Department is dropped, there is Decrease in NET OPERATING INCOME by $509780. particulars amount $ Sales 2,605,800 Variable expenses 776,580 Contribution margin 1,829,220 Fixed expenses 1,784,000 Net operating income (loss) $ 45,220

ID: 2500326 • Letter: B

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 $374,000 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?

______________ (Increase OR Decrease) in NET OPERATING INCOME by ______________

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

Explanation / Answer

Bed & Bath- Hardware Department

If the Linens Department is dropped, there is

Decrease in NET OPERATING INCOME by $509780.

particulars amount $ Sales 2,605,800 Variable expenses 776,580 Contribution margin 1,829,220 Fixed expenses 1,784,000 Net operating income (loss) $ 45,220

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

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

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