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managerial accounting units? Explain EXERCISE 12-15 Dropping or Retalning a Segment (L02]...

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Accounting

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units? Explain EXERCISE 12-15 Dropping or Retalning a Segment (L02] Boyle's Home Center, a retailing company, has two departments, Bath and Kitchen. The com- pany's most recent monthly contribution format income statement follows: Department Bath Kitchen Total Sales..... Variable expenses. Contribution margin... Fixed expenses..... Net operating income (loss)........ $5,000,000 $1,000,000 $4,000,000 1,900,000 300,000 1,600,000 3,100,000 700,000 2,400,000 2,700,000 900,000 1,800,000 $ 400,000 $200,000) $ 600,000 A study indicates that $370,000 of the fixed expenses being charged to the Bath Department are sunk costs or allocated costs that will continue even if the Bath Department is dropped. In addition, the elimination of the Bath Department would result in a 10% decrease in the sales of the Kitchen Department Required: If the Bath Department is dropped, what will be the effect on the net operating income of the com- pany as a whole

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