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 line follows:Thalassines Kataskeves, S.A. Income Statement—Bilge Pump For theQuarter Ended March 31 Sales $ 440,000 Variable expenses: Variablemanufacturing expenses $ 137,000 Sales commissions 54,000 Shipping11,000 Total variable expenses 202,000 Contribution margin 238,000Fixed expenses: Advertising (for the bilge pump product line)30,000 Depreciation of equipment (no resale value) 113,000 Generalfactory overhead 48,000 * Salary of product-line manager 115,000Insurance on inventories 13,000 Purchasing department 51,000 †Total fixed expenses 370,000 Net operating loss $ (132,000 )*Common costs allocated on the basis of machine-hours. †Commoncosts allocated on the basis of sales dollars. Discontinuing thebilge pump product line would not affect sales of other productlines and would have no effect on the company’s total generalfactory overhead or total Purchasing Department expenses. Required:What is the financial advantage (disadvantage) of discontinuing thebilge pump product line?
