Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,240,000 $ 3,190,000 $ 1,050,000 Variable expenses 1,217,000 810,000 407,000 Contribution margin 3,023,000 2,380,000 643,000 Fixed expenses 2,240,000 1,420,000 820,000 Net operating income (loss) $ 783,000 $ 960,000 $ (177,000 ) A study indicates that $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 15% decrease in the sales of the Hardware Department. Required: If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole?
Contribution margin lost if the Linens Department is dropped: |
|
Lost from the Linens Department |
$643,000 |
Lost from the Hardware Department (15% × $2,380,000) |
357,000 |
Total lost contribution margin |
1,000,000 |
Less fixed costs that can be avoided ($820,000 – $378,000) |
442,000 |
Decrease in profits for the company as a whole |
$558,000 |
The production and sale of the liens Department not be discontinued. If the liens Department is discontinued then overall profit of the company will decrease.
Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent...
Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,320,000 $ 3,130,000 $ 1,190,000 Variable expenses 1,262,000 854,000 408,000 Contribution margin 3,058,000 2,276,000 782,000 Fixed expenses 2,240,000 1,430,000 810,000 Net operating income (loss) $ 818,000 $ 846,000 $ (28,000 ) A study indicates that $373,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will...
Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,370,000 $ 3,190,000 $ 1,180,000 Variable expenses 1,334,000 915,000 419,000 Contribution margin 3,036,000 2,275,000 761,000 Fixed expenses 2,200,000 1,360,000 840,000 Net operating income (loss) $ 836,000 $ 915,000 $ (79,000 ) A study indicates that $378,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue...
Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,050,000 $ 3,040,000 $ 1,010,000 Variable expenses 1,330,000 923,000 407,000 Contribution margin 2,720,000 2,117,000 603,000 Fixed expenses 2,130,000 1,310,000 820,000 Net operating income (loss) $ 590,000 $ 807,000 $ (217,000 ) A study indicates that $372,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue...
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Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,330,000 $ 3,190,000 $1,140,000 Variable expenses Contribution margin 1,385,000 967,000 418,000 2,945,000 2,223,000 722,000 Fixed expenses 2,320,000 1,450,000 870,000 Net operating income (1oss) 625,000 77३,०00 । (148,000) A study indicates that $378,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens...
Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,230,000 $ 3,050,000 $ 1,180,000 Variable expenses 1,258,000 839,000 419,000 Contribution margin 2,972,000 2,211,000 761,000 Fixed expenses 2,250,000 1,440,000 810,000 Net operating income (loss) $ 722,000 $ 771,000 $ (49,000 ) A study indicates that $371,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue...
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) Department Total Hardware Linens $ 4,310,000 $ 3,150,000 $ 1,160,000 1,319,000 912,000 407,000 2,991,000 2,238,000 753,000 2,270,000 1,370,000 900,000 $ 721,000 $ 868,000 $ (147,000) A study indicates that $378,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even...
Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,350,000 $ 3,190,000 $ 1,160,000 Variable expenses 1,309,000 908,000 401,000 Contribution margin 3,041,000 2,282,000 759,000 Fixed expenses 2,350,000 1,450,000 900,000 Net operating income (loss) $ 691,000 $ 832,000 $ (141,000 ) A study indicates that $374,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue...
Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company's most recent monthly contribution format income statement follows: TotalDepartment $4,180,000 $3,120,000 $1,060,000 1,217,000 805,000 412,000 Hardware Linens Sales Variable expenses Contribution margin Fixed expenses 2,963,000 2,315,000 648,000 2,370,000 1,500,000 870,000 Net operating income (loss) 593,000 S 815,000 $ (222,000) A study indicates that $377,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department...
Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,340,000 $ 3,180,000 $ 1,160,000 Variable expenses 1,218,000 808,000 410,000 Contribution margin 3,122,000 2,372,000 750,000 Fixed expenses 2,240,000 1,340,000 900,000 Net operating income (loss) $ 882,000 $ 1,032,000 $ (150,000 ) A study indicates that $376,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue...