Luxury Linens has three departments Bath Kitchen and Bedding The most recent

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Luxury Linens has three departments: Bath, Kitchen, and Bedding. The most recent income statement, showing the total operating profit and departmental results is shown below:

	Total	Bath	Kitchen	Bedding
Sales	$2,100,000	$1,000,000	$500,000	$600,000
Cost of goods sold	(1,260,000)	(500,000)	(360,000)	(400,000)
Gross profit	840,000	500,000	140,000	200,000
Direct expenses	(420,000)	(200,000)	(120,000)	(100,000)
Allocated expenses	(325,000)	(100,000)	(150,000)	(75,000)
Net income (loss)	$ 95,000	$ 200,000	$(130,000)	$25,000

Based on this income statement, management is considering eliminating the Kitchen department. If the Kitchen department is eliminated, the other departments will expand to fill the space but sales are not expected to change. Twenty percent of Kitchen's allocated expenses will be avoided due to restructuring and the remainder reallocated equally to Bath and Bedding. Show an analysis indicating whether the Kitchen department should be eliminated.

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