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
|Variable manufacturing expenses||$||126,000|
|Total variable expenses||193,000|
|Advertising (for the bilge pump product line)||23,000|
|Depreciation of equipment (no resale value)||114,000|
|General factory overhead||39,000||*|
|Salary of product-line manager||117,000|
|Insurance on inventories||7,000|
|Total fixed expenses||348,000|
|Net operating loss||$||(81,000||)|
*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.
What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
Let me know in case any issue and query: Presentation can be either: $(6000) or -$6000 or $6000:
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