Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Thalassines Kataskeves, S . A . , of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for

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 StatementBilge Pump
For the Quarter Ended March 31
Sales $ 420,000
Variable expenses:
Variable manufacturing expenses $ 137,000
Sales commissions 41,000
Shipping 20,000
Total variable expenses 198,000
Contribution margin 222,000
Fixed expenses:
Advertising (for the bilge pump product line)24,000
Depreciation of equipment (no resale value)101,000
General factory overhead 43,000*
Salary of product-line manager 115,000
Insurance on inventories 11,000
Purchasing department 53,000
Total fixed expenses 347,000
Net operating loss $ (125,000)
*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 companys total general factory overhead or total Purchasing Department expenses.
Required:
What is the financial advantage (disadvantage) of discontinuing the bilge pump?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Cost Accounting

Authors: Edward J. Vanderbeck

12th Edition

0324100949, 978-0324100945

More Books

Students also viewed these Accounting questions

Question

What should a government do to stop a hyperinflation?

Answered: 1 week ago

Question

What is your greatest weakness?

Answered: 1 week ago

Question

=+5. How would you rewrite the copy to make it more effective?

Answered: 1 week ago