Thalassines Kataskeves SA of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly profit statement for the bilge pump product line is given below:

The discontinuance of the bilge pump product line would not affect sales of other product lines and would have no noticeable effect on the company’s total general factory overhead or total purchasing department expenses.

Required
Would you recommend that the bilge pump product line be discontinued? Support your answer with appropriate computations.

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Revenue Less variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses Thalassines Kataskeves SA Profit statement - bilge pump for the quarter ended 31 March Contribution margin Less fixed expenses: Advertising Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department expenses Total fixed expenses Operating profit (loss) *Common costs allocated on the basis of machine-hours. *Common costs allocated on the basis of sales. €330,000 42,000 18,000 270,000 80,000 105,000* 32,000 8,000 45,000 €850,000 390,000 460,000 540,000* € (80,000)