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				$	420,000
Variable expenses:
Variable manufacturing expenses	$	126,000
Sales commissions		43,000
Shipping		13,000
Total variable expenses					182,000
Contribution margin					238,000
Fixed expenses:
Advertising		27,000
Depreciation of equipment (no resale value)		103,000
General factory overhead		39,000	*
Salary of product-line manager		119,000
Insurance on inventories		9,000
Purchasing department		45,000
Total fixed expenses					342,000
Net operating loss				$	(104,000	)

*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 Statement- Bilge Pump

For the Quarter Ended March 31

Keep product line

Drop product line

difference: net operating income (inc or dec)

xx	xxxxxxxxx	xxxxxxxxx	xxxxxxx
variable expenses
Total variable expense
Fixed expense
Total Fixed expense

b.

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

	Yes
	No