Exercise 11-15 (Static) Dropping or Retaining a Segment [LO11-2] Thalassines Kataskeves, S.A., of Greece makes marine...

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Exercise 11-15 (Static) Dropping or Retaining a Segment [LO11-2] 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: $ 850,000 Variable manufacturing expenses $ 330,000 Sales commissions 42,000 Shipping 18,000 Total variable expenses Contribution margin 390,000 460,000 Fixed expenses: Advertising (for the bilge pump product line) 270,000 80,000 Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories 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. 105,000 32,000 8,000 45,000+ 540,000 $ (80,000) 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? Exercise 11-15 (Static) Dropping or Retaining a Segment [LO11-2] 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: $ 850,000 Variable manufacturing expenses $ 330,000 Sales commissions 42,000 Shipping 18,000 Total variable expenses Contribution margin 390,000 460,000 Fixed expenses: Advertising (for the bilge pump product line) 270,000 80,000 Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories 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. 105,000 32,000 8,000 45,000+ 540,000 $ (80,000) 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?