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    Dropping Exam

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    wadha77
    The document provides financial information for two departments, Bath and Kitchen, of Boyle's Home Center. A study found that $370,000 of fixed costs charged to the Bath department are sunk costs that will still be incurred even if Bath is dropped. Eliminating Bath would also decrease Kitchen's sales by 10%. If Bath is dropped, the overall net operating income for the company would increase by 400,000.

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    Dropping Exam

    Uploaded by

    wadha77
    110 views1 page
    The document provides financial information for two departments, Bath and Kitchen, of Boyle's Home Center. A study found that $370,000 of fixed costs charged to the Bath department are sunk costs that will still be incurred even if Bath is dropped. Eliminating Bath would also decrease Kitchen's sales by 10%. If Bath is dropped, the overall net operating income for the company would increase by 400,000.

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    The document provides financial information for two departments, Bath and Kitchen, of Boyle's Home Center. A study found that $370,000 of fixed costs charged to the Bath department are sunk costs that will still be incurred even if Bath is dropped. Eliminating Bath would also decrease Kitchen's sales by 10%. If Bath is dropped, the overall net operating income for the company would increase by 400,000.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    110 views1 page

    Dropping Exam

    Uploaded by

    wadha77
    The document provides financial information for two departments, Bath and Kitchen, of Boyle's Home Center. A study found that $370,000 of fixed costs charged to the Bath department are sunk costs that will still be incurred even if Bath is dropped. Eliminating Bath would also decrease Kitchen's sales by 10%. If Bath is dropped, the overall net operating income for the company would increase by 400,000.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    Exercise 13-8 Dropping or Retaining a Segment [LO2]

    Boyle's Home Center, a retailing company, has two departments, Bath and Kitchen. The company's most recent
    monthly contribution format income statement follows:

    Department
    Total Bath Kitchen
    5,000,00 1,000,00 4,000,00
    Sales $ $ $
    0 0 0
    1,900,00 1,600,00
    Variable expenses 300,000
    0 0
    3,100,00 2,400,00
    Contribution margin 700,000
    0 0
    2,700,00 1,800,00
    Fixed expenses 900,000
    0 0
    Net operating income (loss) $ 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 company as a
    whole? (Input the amount as positive value. Omit the "$" sign in your response.)

    $
    in overall net operating income

    Hint 1

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