Question

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 $ 440, eee $ 129, eee 54,000 11,000 194,000 246,000 Thalassines kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: Variable manufacturing expenses Sales comissions 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 23,000 106,000 48,000 122,000 6,000 55,000* 360,000 $(114,000) *Common costs allocated on the basis of machine-hours. tCommon costs allocated on the basis of sales dollars. < Prey 8 of 8 8 Next >

Answer 1

Answer- The financial (disadvantage) of discontinuing the bilge pump product line = ($95000).

Explanation-

Thalassines Kataskeves, S.A.
Computation of increase or decrease of net operating income if the product line is continued or discontinued
Particulars	Keep Product Line	Drop Product Line	Difference Net Operating Income Increase or Decrease
	$	$	$
Sales	440000	0	-440000
Less- Variable Expenses
Variable manufacturing expenses	129000	0	129000
Sales commissions	54000	0	54000
Shipping	11000	0	11000
Total variable expenses	194000	0	194000
Contribution margin	246000	0	-246000
Less- Fixed Expenses
Advertising	23000	0	23000
Depreciation of equipment	106000	106000	0
General factory overhead	48000	48000	0
Salary of product line manager	122000	0	122000
Insurance on inventories	6000	0	6000
Purchasing department	55000	55000	0
Total fixed expenses	360000	-209000	151000
Net operating Income (loss)	-114000	-209000	-95000