Effect of departments on net operating incomeboyles home

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Reference no: EM13356154

Effect of departments on net operating income.

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
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

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.)

Decrease__ in overall net operating income

$410000_______

Reference no: EM13356154

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