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 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. tCommon costs allocated on the basis of sales dollars. $ 134,000 47,000 11,000 22,000 107,000 30,000* 128,000 14,000 47,000 $500,000 4 192,000 308,000 348,000 $ (40,000) 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?
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 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. tCommon costs allocated on the basis of sales dollars. $ 134,000 47,000 11,000 22,000 107,000 30,000* 128,000 14,000 47,000 $500,000 4 192,000 308,000 348,000 $ (40,000) 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 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.
$ 134,000
47,000
11,000
22,000
107,000
30,000
128,000
14,000
47,000
+
$ 500,000
192,000
308,000
348,000
$ (40,000)
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?
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