Thalassines Kataskeves, S.A. Income StatementBilge Pump For the Quarter Ended March 31 Sales...
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Accounting
Thalassines Kataskeves, S.A. Income StatementBilge Pump For the Quarter Ended March 31
Sales
$ 410,000
Variable expenses:
Variable manufacturing expenses
$ 132,000
Sales commissions
53,000
Shipping
16,000
Total variable expenses
201,000
Contribution margin
209,000
Fixed expenses:
Advertising (for the bilge pump product line)
23,000
Depreciation of equipment (no resale value)
104,000
General factory overhead
39,000*
Salary of product-line manager
121,000
Insurance on inventories
9,000
Purchasing department
52,000
Total fixed expenses
348,000
Net operating loss
$ (139,000)
*Common costs allocated on the basis of machine-hours.
Common 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 companys total general factory overhead or total Purchasing Department expenses.
Required:
What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
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