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:

The currency in Greece is the euro, denoted above by €. 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:

Would you recommend that the bilge pump product line be discontinued? Support your answer with appropriate computations.

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Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales €850,000 Variable expenses: Variable manufacturing expenses €330,000 42,000 Sales commissions Shipping Total variable expenses Contribution margin 18,000 390,000 460,000 Fixed expenses: 270,000 Advertising Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager 80,000 105,000* 32,000 Insurance on inventories 8,000 45,0001 Purchasing department Total fixed expenses 540,000 € (80.000) Net operating loss +Common costs allocated on the basis of machine-hours. Common costs allocated on the basis of sales dollars.