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 follows: Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss *Common costs allocated on the basis of machine-hours. +Common costs allocated on the basis of sales dollars. $ 430,000 $ 137,000 47,000 18,000 202,000 228,000 24,000 103,000 49,000* 121,000 13,000 46,000t 356,000 $ (128,000) Discontinuing the bilge pump 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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 follows:
Thalassines Kataskeves, S.A.
Income Statement-Bilge Pump
For the Quarter Ended March 31
Sales
Variable expenses:
$ 430,000
Variable manufacturing expenses
$ 137,000
Sales commissions
47,000
Shipping
18,000
Total variable expenses
202,000
Contribution margin
228,000
Fixed expenses:
Advertising (for the bilge pump product line)
24,000
103,000
49,000*
121,000
13,000
46,000+
356,000
$ (128,000)
Depreciation of equipment (no resale value)
General factory overhead
Salary of product-line manager
Insurance on inventories
Purchasing department
Total fixed expenses
Net operating loss
*Common costs allocated on the basis of machine-hours.
†Common costs allocated on the basis of sales dollars.
Discontinuing the bilge pump 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?
Transcribed Image Text: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 follows: Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: $ 430,000 Variable manufacturing expenses $ 137,000 Sales commissions 47,000 Shipping 18,000 Total variable expenses 202,000 Contribution margin 228,000 Fixed expenses: Advertising (for the bilge pump product line) 24,000 103,000 49,000* 121,000 13,000 46,000+ 356,000 $ (128,000) Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss *Common costs allocated on the basis of machine-hours. †Common costs allocated on the basis of sales dollars. Discontinuing the bilge pump 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?
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