9/ CUNY Login Chapter 10 Hw uestion (or 5) 4. 10.00 points Bed & Bath, a retaili

Question

9/ CUNY Login Chapter 10 Hw uestion (or 5) 4. 10.00 points 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 Total HardwareLinens $4,220,000 $3,120,000 $1,100,000 361,000961,000 400,000 Contribution margin Fixed expenses 2,859,000 2,159,000 700,000 2,310,000 1,470,000840,000 Net operating income (loss) S 549,000 $ 689,000 $ (140,000) 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 12% decrease in the sales of the Hardware Department Required: f the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole? References eBook & Resources Worksheet Difficulty: 1 Easy O Type here to search

Explanation / Answer

Lost from the Linen Department 700000 Lost from the Hardware Department (12% × $2,159,000) 259080 Total lost contribution margin 959080 Less fixed costs that can be avoided ($840,000 – $374,000) 466000 Decrease in profits for the company as a whole 493080

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