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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 income statement for the bilge pump product line follows: THALASSINES KATASKEVES, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales 950,000 Less: Variable expenses: Variable manufacturing expenses 340,000 Sales commissions Shipping Total variable expenses Contribution margin 46,000 14,000 400,000 550,000 Less: Fixed expenses: Advertising 290,000 Depreciation of equipment (no resale value) 90,000 General factory overhead 115,000* Salary of product-line manager 38,000 Insurance on inventories 18,000 Purchasing department expenses 65,000+ Total fixed expenses Net operating loss 616,000 (66,000) *Common costs allocated on the basis of machine-hours. *Common costs allocated on the basis of sales dollars. The currency in Greece is the euro, denoted by . The discontinuance of the bilge pump product line would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses. Required: Compute the net advantage or disadvantage if the bilge pump product line be discontinued? (Negative amount should be indicated by a minus sign.) Net advantage (disadvantage) of dropping the line Should the bilge pump product line be discontinued? Yes No
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