Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on...
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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 StatementBilge Pump For the Quarter Ended March 31 Sales $ 420,000 Variable expenses: Variable manufacturing expenses $ 133,000 Sales commissions 44,000 Shipping 13,000 Total variable expenses 190,000 Contribution margin 230,000 Fixed expenses: Advertising (for the bilge pump product line) 29,000 Depreciation of equipment (no resale value) 113,000 General factory overhead 47,000* Salary of product-line manager 114,000 Insurance on inventories 6,000 Purchasing department 58,000 Total fixed expenses 367,000 Net operating loss $ (137,000) *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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