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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 $ 410,000 Variable expenses: Variable manufacturing expenses $ 134,000 Sales commissions 47,000 15,000 Shipping Total variable expenses 196,000 214,000 Contribution margin Fixed expenses: 27,000 Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) 108,000 General factory overhead 34,000* Salary of product-line manager Insurance on inventories 111,000 8,000 53,000+ Purchasing department Total fixed expenses Net operating loss 341,000 (127,000) *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 company's total general overhead or total Purchasing Department expenses Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Financial (disadvantage)
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