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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:
Saved Help Sa Exercise 6-15 (Algo) Dropping or Retaining a Segment (L06-2] 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: $ 440,000 5.124.000 41,000 20.000 Thalassines kataskeves, 5.A. Income Statement ailge Pump For the Quarter Ended March 31 Sales Variable expenses Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin 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 185,000 255,000 21,000 120,000 35.000 123,000 13,000 47.0001 359,000 $(104,000) "Common costs allocated on the basis of machine hours. tCommon 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 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:
What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
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