Q1) Boyle's Home Center, retailing company, has 2 departments, Bath and Kitchen. Company's most recent monthly contribution format income statement follows:
| |
Department |
| |
Total |
Bath |
Kitchen |
| Sales |
$5000000 |
$1000000 |
$4000000 |
| Variable expenses |
1900000 |
300000 |
1600000 |
| Contribution margin |
3100000 |
700000 |
2400000 |
| Fixed expenses |
2700000 |
900000 |
1800000 |
| Net operating income (loss) |
$400000 |
$(200,000) |
$600000 |
Study points out that $370,000 of fixed expenses being charged to Bath Department are sunk costs or assigned costs which will continue even if Bath Department is dropped. Additionally, elimination of Bath Department would result in 10% decrease in sales of Kitchen Department.
problem:
If Bath Department is dropped, prepare down the effect on net operating income of company as whole?
| Decrease__ in overall net operating income |
$410000_______ |