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Exercise 10-15 Dropping or Retaining a Segment LO10-2] Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: $470,000 Variable manufacturing expenses Sales commissions Shipping $129,000 53,000 12,000 Total variable expenses 194,000 Contribution margin Fixed expenses 276,000 Advertising Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department 20,000 110,000 46,000* 125,000 9,000 52,000t Total fixed expenses 362,000 Net operating loss $(86,000) Common costs allocated on the basis of machine-hours tCommon costs allocated on the basis of sales dollars Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses Required a. Compute the increase or decrease of net operating income if the product line is continued or discontinued. (Decreases should be indicated by a minus sign.) Required a. Compute the increase or decrease of net operating income if the product line is continued or discontinued. (Decreases should be indicated by a minus sign.) Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Difference Net Operating Income Drop Product Line Product LIncrease or Keep Decrease) Variable expenses Total variable expenses Fixed expenses Total fixed expenses

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