Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping 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. $ 120,000 41,000 24,000 25,000 113,000 39,000 124,000 7,000 41,000 $ 480,000 185,000 295,000 349,000 $ (54,000) Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the comp total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping 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. $ 120,000 41,000 24,000 25,000 113,000 39,000 124,000 7,000 41,000 $ 480,000 185,000 295,000 349,000 $ (54,000) Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the comp total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vinubhai
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
Sales
Variable expenses:
Variable manufacturing expenses
Sales commissions
Shipping
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.
$ 120,000
41,000
24,000
25,000
113,000
Answer is complete but not entirely correct.
Financial (disadvantage)
26,000
39,000
124,000
7,000
41,800
$ 480,000
185,000
295,000
349,000
$ (54,000)
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?
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