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11 value: 1.25 points 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 Variable expenses: Variable manufacturing $450,000 $139,000 48,000 12,000 expenses Sales commissions Shipping Total variable expenses 199,000 Contribution margin Fixed expenses: Advertising Depreciation of equipment (no resale value) General factory overhead Salary of product-line 251,000 25,000 104,000 37,000* 125,000 manager Insurance on inventories 9,000 50,000t Purchasing department Total fixed expenses 350,000 (99,000) 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 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 Difference Net Operating Income Keep Drop Product Product Line Line Increase or |(Decrease) Variable expenses: Total variable expenses Fixed expenses: Total fixed expenses b. Would you recommend that the bilge pump product line be discontinued? Yes No

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