Mattress & Tub, a retailing agency, has two departments-Hardware and Linens. The company's latest month-to-month contribution format income assertion follows: Product sales Variable payments Contribution margin Mounted payments Web working income (loss) Division Full Hardware Linens $ 4,230,000 $three,150,000 $1,080,000 1,389,000 972,000 417,000 2,841,000 2,178,000 663,000 2,280,000 1,420,000 860,000 $ 561,000 $ 758,000 $ (197,000)
A study signifies that $372,000 of the mounted payments being charged to Linens are sunk costs or allotted costs that may proceed even when the Linens Division is dropped. In addition to, the elimination of the Linens Division will result in a 12% decrease throughout the product sales of the Hardware Division Required: What is the financial profit (disadvantage) of discontinuing the Linens Division? .