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Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its...

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Accounting

Thalassines Kataskeves, S.A., of Greece makes marine equipment.The company has been experiencing losses on its bilge pump productline for several years. The most recent quarterly contributionformat income statement for the bilge pump product linefollows:

Thalassines Kataskeves, S.A.
Income Statement—Bilge Pump
For the Quarter Ended March 31
Sales$460,000
Variable expenses:
Variable manufacturing expenses$132,000
Sales commissions49,000
Shipping20,000
Total variable expenses201,000
Contribution margin259,000
Fixed expenses:
Advertising (for the bilge pump product line)28,000
Depreciation of equipment (no resale value)101,000
General factory overhead50,000*
Salary of product-line manager121,000
Insurance on inventories6,000
Purchasing department60,000†
Total fixed expenses366,000
Net operating loss$(107,000)

*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 salesof other product lines and would have no effect on the company’stotal general factory overhead or total Purchasing Departmentexpenses.

Required:

What is the financial advantage (disadvantage) of discontinuingthe bilge pump product line?

Answer & Explanation Solved by verified expert
3.9 Ratings (666 Votes)
What is the financial advantage disadvantage of discontinuing the bilge pump product line There is financial disadvantage of 3000 in discontinuing the bilge pump product line our decision is based on the calculation made in the table given below Reason for financial disadvantage As per the calculation given in the following table it is very much clear that discontinuing the product line    See Answer
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