The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable. Depreciation of special equipment. Salaries of product-line managers. Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. Total $935,000 467,000 468,000 69,800 43,800 114,300 187,000 414,900 $53,100 Dirt Bikes. $ 269,000 115,000 154,000 8,800 20,300 40,600 53,800 123,500 $ 30,500 Mountain Bikes $ 408,000 200,000 208,000 Racing Bikes $ 258,000 152,000 106,000 40,800 20, 200 8,000 15,500 38,200 35,500 81,600 51,600 168,600 122,800 $ 39,400 $ (16,800) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued?

The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable. Depreciation of special equipment. Salaries of product-line managers. Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. Total $935,000 467,000 468,000 69,800 43,800 114,300 187,000 414,900 $53,100 Dirt Bikes. $ 269,000 115,000 154,000 8,800 20,300 40,600 53,800 123,500 $ 30,500 Mountain Bikes $ 408,000 200,000 208,000 Racing Bikes $ 258,000 152,000 106,000 40,800 20, 200 8,000 15,500 38,200 35,500 81,600 51,600 168,600 122,800 $ 39,400 $ (16,800) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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