EXERCISE 12-15 Dropping or Retaining a Segment LO12-2 Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experi- encing losses on its bilge pump product line for several years. The most recent quarterly contribu- tion 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. $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) 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 Depart- ment expenses.

EXERCISE 12-15 Dropping or Retaining a Segment LO12-2. Thalassines Kataskeves, S. A, of Greece makes marine equipanent. 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. Discontinuing the bilge pump product line would not affect valer of other product lines and would have no effect on the company's total gencral factory owerhead of total Rurchasing Depart: ment expenses