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: Sales Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Variable expenses: Variable manufacturing expenses $ 400,000 $ 132,000
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: Sales Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Variable expenses: Variable manufacturing expenses $ 400,000 $ 132,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Sales
$ 400,000
Variable expenses:
$
Variable manufacturing expenses
132,000
Sales commissions
50,000
Shipping
21,000
Total variable expenses
203,000
Contribution margin
197,000
Fixed expenses:
Advertising (for the bilge pump product
line)
30,000
Depreciation of equipment (no resale
value)
107,000
General factory overhead
Insurance on inventories
Purchasing department
Total fixed expenses
37,000*
Salary of product-line manager
126,000
6,000
44,000+
350,000
Net operating loss
*Common costs allocated on the basis of machine-hours.
(153,000)
†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
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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