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: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.Hint: - Common costs allocated based on a cost driver are generally unavoidable fixed costsRequired:Would you recommend that the bilge pump product line be discontinued? Support your answer with appropriate computations. Thalassines Kataskeves, S.A.Income Statement-Bilge PumpFor the Quarter Ended March 31Sales.$850,000Varlable expenses:Varlable manufacturing expenses.$330,000Sales commlsslons..42,000Shipping....Total varlable expenses....Contribution margin.Axed expenses:18,000390,000460,000AdvertisingDepreclation of equlpment (no resale value).General factory overhead..Salary of product-lIne managerInsurance on Inventories...Purchasing department..Total fixed expenses270,00080,000105,00032,0008,00045,000*540,000Net operating loss$ (80,000)"Common costs allocated on the basis of machine-hours."Common costs allocated on the basis of sales dollars.

Calculation of Financial Advantage or (Disadvantage) Particulars Amount Amount Loss of…

Answered: Thalassines Kataskeves, S.A., of Greece…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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:

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.

Hint: - Common costs allocated based on a cost driver are generally unavoidable fixed costs

Required:

Would you recommend that the bilge pump product line be discontinued? Support your answer with appropriate computations.

Thalassines Kataskeves, S.A.
Income Statement-Bilge Pump
For the Quarter Ended March 31
Sales.
$850,000
Varlable expenses:
Varlable manufacturing expenses.
$330,000
Sales commlsslons..
42,000
Shipping....
Total varlable expenses....
Contribution margin.
Axed expenses:
18,000
390,000
460,000
Advertising
Depreclation of equlpment (no resale value).
General factory overhead..
Salary of product-lIne manager
Insurance on Inventories...
Purchasing department..
Total fixed expenses
270,000
80,000
105,000
32,000
8,000
45,000*
540,000
Net operating loss
$ (80,000)
"Common costs allocated on the basis of machine-hours.
"Common costs allocated on the basis of sales dollars.

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