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 Statement-Bilge Pump For the Quarter Ended March 31 es Sales Variable expenses: Sales commissions Shipping Variable manufacturing expenses Total variable expenses Contribution margin Fixed expenses: Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss *Common costs allocated on the basis of machine-hours. +Common costs allocated on the basis of sales dollars. $ 490,000 $ 126,000 52,000. 18,000 196,000 294,000 25,000 109,000 46,000 122,000 15,000 50,000+ 367,000 $ (73,000) Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Financial (disadvantage) ง
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 Statement-Bilge Pump For the Quarter Ended March 31 es Sales Variable expenses: Sales commissions Shipping Variable manufacturing expenses Total variable expenses Contribution margin Fixed expenses: Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss *Common costs allocated on the basis of machine-hours. +Common costs allocated on the basis of sales dollars. $ 490,000 $ 126,000 52,000. 18,000 196,000 294,000 25,000 109,000 46,000 122,000 15,000 50,000+ 367,000 $ (73,000) Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Financial (disadvantage) ง
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text: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 Statement-Bilge Pump
For the Quarter Ended March 31
es
Sales
Variable expenses:
Sales commissions
Shipping
Variable manufacturing expenses
Total variable expenses
Contribution margin
Fixed expenses:
Advertising (for the bilge pump product line)
Depreciation of equipment (no resale value)
General factory overhead
Salary of product-line manager
Insurance on inventories
Purchasing department
Total fixed expenses
Net operating loss
*Common costs allocated on the basis of machine-hours.
+Common costs allocated on the basis of sales dollars.
$ 490,000
$ 126,000
52,000.
18,000
196,000
294,000
25,000
109,000
46,000
122,000
15,000
50,000+
367,000
$ (73,000)
Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's
total general factory overhead or total Purchasing Department expenses.
Required:
What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
Financial (disadvantage)
ง
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