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				$	480,000
Variable expenses:
Variable manufacturing expenses	$	124,000
Sales commissions		52,000
Shipping		16,000
Total variable expenses					192,000
Contribution margin					288,000
Fixed expenses:
Advertising		20,000
Depreciation of equipment (no resale value)		113,000
General factory overhead		47,000	*
Salary of product-line manager		125,000
Insurance on inventories		13,000
Purchasing department		55,000
Total fixed expenses					373,000
Net operating loss				$	(85,000	)

*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 companys total general factory overhead or total Purchasing Department expenses.

a.

Compute the increase or decrease of net operating income if the product line is continued or discontinued. (Decreases should be indicated by a minus sign.)

Thalassines Kataskeves, S.A.
Income StatementBilge Pump
For the Quarter Ended March 31
	Keep Product Line	Drop Product Line	Difference: Net Operating Income Increase or (Decrease)
Variable expenses:
Total variable expenses	0		0
	0	0	0
Fixed expenses:
Total fixed expenses	0	0	0
	0	0	0

b.

Would you recommend that the bilge pump product line be discontinued?

	No
	Yes