Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its...

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Thalassines Kataskeves, S.A., of Greece makes marine equipment.The company has been experiencing losses on its bilge pump productline for several years. The most recent quarterly contributionformat income statement for the bilge pump product linefollows:
Thalassines Kataskeves, S.A.
Income Statement—Bilge Pump
For the Quarter Ended March 31
Sales $ 460,000
Variable expenses:
Variable manufacturing expenses $ 132,000
Sales commissions 49,000
Shipping 20,000
Total variable expenses 201,000
Contribution margin 259,000
Fixed expenses:
Advertising (for the bilge pump product line) 28,000
Depreciation of equipment (no resale value) 101,000
General factory overhead 50,000 ^*
Salary of product-line manager 121,000
Insurance on inventories 6,000
Purchasing department 60,000 ^†
Total fixed expenses 366,000
Net operating loss $ (107,000 )
*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 salesof other product lines and would have no effect on the company’stotal general factory overhead or total Purchasing Departmentexpenses.
Required:
What is the financial advantage (disadvantage) of discontinuingthe bilge pump product line?

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3.9 Ratings (666 Votes)

What is the financial advantage disadvantage of discontinuing the bilge pump product line There is financial disadvantage of 3000 in discontinuing the bilge pump product line our decision is based on the calculation made in the table given below Reason for financial disadvantage As per the calculation given in the following table it is very much clear that discontinuing the product line See Answer

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Thalassines Kataskeves, S.A. Income Statement—Bilge Pump For the Quarter Ended March 31
Sales				$	460,000
Variable expenses:
Variable manufacturing expenses	$	132,000
Sales commissions		49,000
Shipping		20,000
Total variable expenses					201,000
Contribution margin					259,000
Fixed expenses:
Advertising (for the bilge pump product line)		28,000
Depreciation of equipment (no resale value)		101,000
General factory overhead		50,000	^*
Salary of product-line manager		121,000
Insurance on inventories		6,000
Purchasing department		60,000	^†
Total fixed expenses					366,000
Net operating loss				$	(107,000	)