GHI, LLC & nbs

Income statement-bilge Pump & nbsp; For the Quarter Ended March - 31, 2006

Sales & nbsp; - $850,000
Less variable expenses:

Variable manufacturing expenses $330,000
Sales commissio ns 42,000
Shipping 18,000
Total variable expenses 390,000
Contribution margin 460,000

Less fixed expenses
Advertising 270,000
Depreciation of equipment (no resale value) 80,000
General factory overhead 105,000 (1)
Salary of product-line manager 32,000
Insurance on inventories 8,000
Purchasing department expenses 45,000 (2)
Total fixed expenses 540,000
Net operating loss $(80,000)

(1) Common cost allocated on the basis of machine hours.
(2) Common cost 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:
Would you recommend that the bilge pump product line be discontinued?
Prepare a comparative income statement to support your decisions