## Answers

Answer- The financial (disadvantage) of discontinuing the bilge pump product line = $(150000).Hence bilge pump product should not be discontinued.

Explanation-

Thalassines Kataskeves, S.A. | |||

Computation of increase or decrease of net operating income if the product line is continued or discontinued | |||

Particulars | Keep Product Line | Drop Product Line | Difference Net Operating Income Increase or Decrease |

$ | $ | $ | |

Sales | 850000 | 0 | -850000 |

Less- Variable Expesnes | |||

Variable manufacturing expenses | 330000 | 0 | 330000 |

Sales commissions | 42000 | 0 | 42000 |

Shipping | 18000 | 0 | 18000 |

Total variable expenses | 390000 | 0 | 390000 |

Contribution margin | 460000 | 0 | -460000 |

Less- Fixed Expesnes | |||

Advertising | 270000 | 0 | 270000 |

Depreciation of equipment | 80000 | 80000 | 0 |

General factory overhead | 105000 | 105000 | 0 |

Salary of product line manager | 32000 | 0 | 32000 |

Insurance on inventories | 8000 | 0 | 8000 |

Purchasing department | 45000 | 45000 | 0 |

Total fixed expenses | 540000 | 230000 | 310000 |

Net operating Income (loss) | -80000 | -230000 | -150000 |

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