owning the more expensive 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 $850,000 Sales Variable expenses $330,000 42,000 18,000 Sales commissions .. Shipping .. Total variable expenses Contribution margin . Fixed expenses: 390,000 460,000 Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager 270,000 80,000 105,000 32,000 8,000 45,000 Purchasing department . Total fixed expenses Net operating loss Common costs allocated on the basis of machine-hours 540,000 $ (80,000 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 Depart- ment expenses