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Exerclse 1 1 - 1 5 ( Static ) Dropping or Retaining a Segment [ LO 1 1 - 2 ] Thalassines Kataskeves, S .
Exerclse Static Dropping or Retaining a Segment LO
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 contribution format income statement for the bilge pump product line follows:
tabletableThalassines Kataskeves, SAIncome StatementBilge PumpFor the Quarter Ended March $theta Variable expenses:Variable manufacturing expenses,$Sales commissions,ShippingTotal variable expenses,,theta theta Contribution margin,,theta Fixed expenses:Advertising for the bilge pump product lineDepreciation of equipment no resale valueGeneral factory overhead,eSalary of productline manager,Insurance on inventories,Purchasing department,eegTotal fixed expenses,,theta Net operating loss,,$theta theta
Common costs allocated on the basis of machinehours.
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.
Requlred:
What is the financial advantage disadvantage of discontinuing the bilge pump product line?
Answer is complete but not entirely correct.
Financial advantage
$
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