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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 Statement-Bilge Pump For the Quarter Ended March 31 Sales 420,000 Variable expenses: Variable manufacturing expenses $137,000 Sales commissions 49,000 22,000 Shipping Total variable expenses 208,000 212,000 Contribution margin Fixed expenses: Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) 30,000 117,000 General factory overhead Salary of product-line manager inventories 33,000 130,000 14,000 Insurance on 55,000t Purchasing department Total fixed expenses 379,000 $(167,000) Net operating loss *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
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