Exercise 10-15 Dropping or Retaining a Segment [L010-2 makes marine equipment. The company has been experiencing Thalassines Kataskeves, SA, of Greece 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, SA Income Statement-Bilge Pump For the Quarter Ended March 31 $ 420,000 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping $125,000 53,000 21,000 Total variable expenses 199,000 221,000 Contribution margin Fixed expenses 29.000 Advertising Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories 105,000 40,000 128,000 14,000 41,000t Purchasing department Total fixed expenses Net operating loss 357,000 S(136,000) "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 Required a. C ompute the Increase or decrease of net operating income if the product line is continued or discontinued. (Decreases should be indicated by a minus sign.) s Kataskeves, SA. Pump For the Quarter Ended March 31 Income Keep Drop Net Product Lino Product Line