Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has

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 Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 $ 420,000 Variable expenses: Variable manufacturing expenses Sales commissions $130,000 42,000 16,000 Total variable expenses 188,000 Contribution margin Fixed expenses: 232,000 Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories 28,000 116,000 46,000 120,000 6,000 59,000t Total fixed expenses 375,000 Net operating loss $(143,000) Common costs allocated on the basis of machine-hours tCommon 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

Explanation / Answer

a keep product line drop product line difference variable expenses manf 130000 0 130000 sales commission 42000 0 42000 shipping 16000 0 16000 total variable exp 188000 0 188000 fixed expenses advertising 28000 0 28000 depreciation 116000 116000 0 factory oh 46000 46000 0 salary 120000 0 120000 insurance 6000 0 6000 purchasing dept 59000 59000 0 total fixed exp 375000 221000 154000 b discontinue

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