Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pum product line for several years. The most recent quarterly contribution format Income statement for the bilge pump product line fo Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: $ 430,000 Variable manufacturing expenses $ 132,000 Sales commissions 41,000 Shipping 24,000 Total variable expenses Contribution margin 197,000 233,000 Fixed expenses: Advertising (for the bilge pump product line) 30,000 109,000 50,000* 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. 111,000 6,000 43,000+ 349,000 $ (116,000) Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the compan total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pum product line for several years. The most recent quarterly contribution format Income statement for the bilge pump product line fo Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: $ 430,000 Variable manufacturing expenses $ 132,000 Sales commissions 41,000 Shipping 24,000 Total variable expenses Contribution margin 197,000 233,000 Fixed expenses: Advertising (for the bilge pump product line) 30,000 109,000 50,000* 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. 111,000 6,000 43,000+ 349,000 $ (116,000) Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the compan 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
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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 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
$ 430,000
$ 132,000
41,000
24,000
Total variable expenses.
Contribution margin
197,000
233,000
Fixed expenses:
Advertising (for the bilge pump product line)
30,000
109,000
50,000*
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.
111,000
6,000
43,000+
349,000
$ (116,000)
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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