Question
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: $430,000 Variable manufacturing expenses Sales commissions Shipping Contribution margin Total variable expenses Fixed expenses: Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss "Common costs allocated on the basis of machine-hours. Common costs allocated on the basis of sales dollars. $ 135,000 48,000 15,000 198,000 232,000 23,000 103,000 46,000 111,000 12,000 53,000 348,000 $(116,000) 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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