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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
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 product line follows: Thalassines Kataskeves, S.A Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: Variable manufacturing expenses 460,000 137,000 Sales commissions 54,000 Shipping Total variable expenses Contribution margin Fixed expenses: 13,000 204,000 256,000 Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) 24,000 114,000 General factory overhead Salary of product -line manager 33,000 120,000 8,000 Insurance on inventories 47,000t Purchasing department Total fixed expenses 346,000 (90,000) Net operating loss *Common costs allocated on the basis of machine-hours. tCommon 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. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line
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