Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its...
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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: Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales $ 420,000 Variable expenses: Variable manufacturing expenses $ 131,000 Sales commissions Shipping 43,000 23,000 Total variable expenses Contribution margin: 197,000 223,000 Fixed expenses: 29,000 Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) 114,000 General factory overhead 46,000 Salary of product-line manager 122,000 Insurance on inventories 10,000 Purchasing department 41,000 Total fixed expenses 362,000 $(139,000) Net operating loss *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. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Financial advantage 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 $ 420,000 Variable expenses: Variable manufacturing expenses $ 131,000 Sales commissions Shipping 43,000 23,000 Total variable expenses Contribution margin: 197,000 223,000 Fixed expenses: 29,000 Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) 114,000 General factory overhead 46,000 Salary of product-line manager 122,000 Insurance on inventories 10,000 Purchasing department 41,000 Total fixed expenses 362,000 $(139,000) Net operating loss *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. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Financial advantage
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Answer The financial disadvantage of discontinuing the bilge pump product line 62000 Expl... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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