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 PumpFor the Quarter Ended March 31Sales $ 470,000Variable expenses: Variable manufacturing expenses$ 124,000 Sales commissions41,000 Shipping19,000 Total variable expenses 184,000Contribution margin 286,000Fixed expenses: Advertising (for the bilge pump product line)23,000 Depreciation of equipment (no resale value)118,000 General factory overhead40,000* Salary of product-line manager125,000 Insurance on inventories10,000 Purchasing department44,000† Total fixed expenses 360,000Net operating loss $ (74,000)*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 factory overhead or total Purchasing Department expenses. Required:What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? please do not give solution in image format

The impact that dropping a particular product line will have on your operating income can’t be…

Answered: contribution format income statement

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter2: Basic Managerial Accounting Concepts

Section: Chapter Questions

Problem 26BEA

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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 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		$ 470,000
Variable expenses:
Variable manufacturing expenses	$ 124,000
Sales commissions	41,000
Shipping	19,000
Total variable expenses		184,000
Contribution margin		286,000
Fixed expenses:
Advertising (for the bilge pump product line)	23,000
Depreciation of equipment (no resale value)	118,000
General factory overhead	40,000^*
Salary of product-line manager	125,000
Insurance on inventories	10,000
Purchasing department	44,000^†
Total fixed expenses		360,000
Net operating loss		$ (74,000)

*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 factory overhead or total Purchasing Department expenses.

Required:

What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?

please do not give solution in image format

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