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 follows:Thalassines Kataskeves, S.A.Income Statement—Bilge PumpFor the Quarter Ended March 31Sales $ 410,000Variable expenses: Variable manufacturing expenses$ 123,000 Sales commissions50,000 Shipping21,000 Total variable expenses 194,000Contribution margin 216,000Fixed expenses: Advertising (for the bilge pump product line)27,000 Depreciation of equipment (no resale value)120,000 General factory overhead38,000* Salary of product-line manager113,000 Insurance on inventories5,000 Purchasing department49,000† Total fixed expenses 352,000Net operating loss $ (136,000)*Common costs allocated on the basis of machine-hours.†Common costs allocated on the basis of sales dollars.Discontinuing the bilge pump 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.

Step 1: Overview of the Question :-Sales Revenue = $410,000Total Variable Expenses =…

Answered: Thalassines Kataskeves, S.A., of Greece…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 follows:

Thalassines Kataskeves, S.A.
Income Statement—Bilge Pump
For the Quarter Ended March 31
Sales		$ 410,000
Variable expenses:
Variable manufacturing expenses	$ 123,000
Sales commissions	50,000
Shipping	21,000
Total variable expenses		194,000
Contribution margin		216,000
Fixed expenses:
Advertising (for the bilge pump product line)	27,000
Depreciation of equipment (no resale value)	120,000
General factory overhead	38,000^*
Salary of product-line manager	113,000
Insurance on inventories	5,000
Purchasing department	49,000^†
Total fixed expenses		352,000
Net operating loss		$ (136,000)

*Common costs allocated on the basis of machine-hours.

†Common costs allocated on the basis of sales dollars.

Discontinuing the bilge pump 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.

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