Save & ENTE Check my Bed & Bath, a retalling company, has two departments--Hardware and...
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Save & ENTE Check my Bed & Bath, a retalling company, has two departments--Hardware and Linens. The company's most recent monthly contribution format income statement follows: Salon Variable expenses Contribution margin Pixed expenses Net operating income (loss) Department Total Hardware Linens $ 4,200,000 $3,070,000 $ 1.130,000 1,319,000 911,000 408,000 2,881,000 2,159,000 722,000 2,230,000 1,360,000 870,000 $ 651,000 $ 799,000 6 (148,000) A study indicates that $379,000 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: What is the financial advantage (disadvantage) of discontinuing the Linens Department
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