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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 StatementBilge Pump For the Quarter Ended March 31
Sales $ 490,000
Variable expenses:
Variable manufacturing expenses $ 123,000
Sales commissions 54,000
Shipping 15,000
Total variable expenses 192,000
Contribution margin 298,000
Fixed expenses:
Advertising 23,000
Depreciation of equipment (no resale value) 110,000
General factory overhead 31,000 *
Salary of product-line manager 115,000
Insurance on inventories 8,000
Purchasing department 45,000
Total fixed expenses 332,000
Net operating loss $ (34,000 )
*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.

Required
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
Fixed expenses:
Total fixed expenses

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