Financial Advantage of Discontinuing Bilge Pump Product Line

What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?

The financial advantage (disadvantage) of discontinuing the bilge pump product line is -$150,000. This means that if Thalassines Kataskeves, S.A. decides to discontinue the bilge pump product line, they would incur a financial loss of $150,000.

Calculation of Financial Advantage (Disadvantage)

Fixed Expense Calculation: The fixed expense is calculated by adding the advertising costs, salary of the product-line manager, and insurance on inventories. Fixed expense = Advertising + Salary of product-line manager + Insurance on inventories Fixed expense = $270,000 + $32,000 + $8,000 Fixed expense = $310,000 Financial Advantage (Disadvantage) Calculation: The financial advantage (disadvantage) is calculated by deducting the fixed expenses from the contribution margin. Financial Advantage (Disadvantage) = Fixed Expense - Contribution Margin Financial Advantage (Disadvantage) = $310,000 - $460,000 Financial Advantage (Disadvantage) = -$150,000 Therefore, the financial advantage (disadvantage) of discontinuing the bilge pump product line is a loss of $150,000. This indicates that continuing to operate the bilge pump product line results in higher expenses compared to the contribution margin generated from sales, leading to a negative financial impact on the company.
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