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 StatementBilge Pump

For the Quarter Ended March 31

Sales

$

440,000

Variable expenses:

Variable manufacturing expenses

$

129,000

Sales commissions

47,000

Shipping

11,000

Total variable expenses

187,000

Contribution margin

253,000

Fixed expenses:

Advertising (for the bilge pump product line)

28,000

Depreciation of equipment (no resale value)

107,000

General factory overhead

50,000

^*

Salary of product-line manager

113,000

Insurance on inventories

7,000

Purchasing department

53,000

Total fixed expenses

358,000

Net operating loss

$

(105,000

)

*Common costs allocated on the basis of machine-hours.

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.

Required:

What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?

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