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 TotalHardware Linens $4,300,000 $3,160,000 $1.140,000 1,322,000 903,000 419.000 Sales Variable expenses Contribution margin 2,978,000 2,257,000 721,000 2,370,000 1500,000 870,000 Fixed expenses Net operating income (loss) 608,000 S 757 000 S (149000) A study indicates that $376,000 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 16% 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? in net operating income

Explanation / Answer

Loss in Contribution margin -721000 Avoidable fixed costs 494000 =870000-376000 Loss in Contribution margin of Hardware -361120 =2257000*16% Change in income -588120 Decreae in net operating income by $588120

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

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