Que value 8.00 points Bed & Bath, a retailing company, has two departments, Hard
ID: 2600058 • Letter: Q
Question
Que value 8.00 points Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company's most recent monthly contribution format income statement follows Department Sales Variable expenses Total Hardware Linens $4,320,000 $3,130,000 $1,190,000 1,288,000 884,000 404,000 Contribution margin Flxed expenses 3,032,000 2,246,000 786,000 2,340,000 1,490,000 850,000 Net operating income (loss) 692,000 S 756,000 (64,000) A study indicates that $377.000 of the fixed expenses boing charged to Linens are sunk costs or allocaterd costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 19% decrease in the sales of the Hardware Department Required: the Linens Department is dropped, what wil be the effect a whole? on the net operating income of the company as O Type here to searchExplanation / Answer
Net operating income will decreased by $739,740 ($692,000 + $47,740).
Particulars Total Sales ($3,130,000 -19%) $2,535,300 Variable expenses ($884,000-19%) $716,040 Contribution Margin $1,819,260 Fixed expenses ($1,490,000 +$377,000) $1,867,000 Net Operating income(l0ss) ($47,740)