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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				$	410,000
Variable expenses:
Variable manufacturing expenses	$	127,000
Sales commissions		45,000
Shipping		21,000
Total variable expenses					193,000
Contribution margin					217,000
Fixed expenses:
Advertising		21,000
Depreciation of equipment (no resale value)		114,000
General factory overhead		48,000	*
Salary of product-line manager		121,000
Insurance on inventories		7,000
Purchasing department		50,000
Total fixed expenses					361,000
Net operating loss				$	(144,000	)

*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

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 StatementBilge Pump For the Quarter Ended March 31 Keep Product Line Drop Product Line Difference: Net Operating Income Increase or (Decrease) Sales 410,000 0 (410,000) Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses 0 0 Contribution margin 410,000 0 (410,000) Fixed expenses: Advertising Depreciation of equipment General factory overhead Salary of product line manager Insurance on inventories Purchasing department Total fixed expenses 0 0 0 Net operating loss 410,000 0 (410,000)

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