Exercise $11-15($Algo$)$ Dropping or Retaining a Segment $[$LO$11-2]$

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

Variable expenses:

Variable manufacturing expenses

Sales commissions

Shipping

Total variable expenses

Contribution margin

Fixed expenses:

Advertising $($for the bilge pump product line$)26,000$

Depreciation $of$ equipment $(no$ resale value$)111,000$

General factory overhead $32,000**,$

Salary $of$ product$-$line manager $127,000$

Insurance $on$ inventories $9,000$

Purchasing department

Total fixed expenses

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?