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Thalassines kataskeves, S

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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: $ 490,000 $ 124,000 40,000 10,000 174,000 316,000 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) Depreciation of equipment (no renale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss 23,000 112,000 40,000 112,000 8,000 59,000+ 354,000 $ (38,000) *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 (disadvantage)
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (los) Department Total Hardware Linens $ 4,250,000 $3,050,000 $1,200,000 1,392,000 986,000 406,000 2,858,000 2,064,000 794,000 2,380,000 1,490,000 890,000 $ 478,000 $ 574,000 (96,000) A study indicates that $374,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 12% decrease in the sales of the Hardware Department Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage)