1.What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? 2. Should the production and sale of racing bikers be discontinued? The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales andexpenses for the past quarter follow:MountainRacing Bikes$ 60,00033,00027,000TotalDirt BikesBikesSales$ 300,000120,000180,000$ 90,00027,00063,000$ 150,00060,000Variable manufacturing and selling expensesContribution marginFixed expenses:Advertising, traceableDepreciation of special equipmentSalaries of product-line managersAllocated common fixed expenses*Total fixed expenses90,00010,0006,00012,00018,00014,0009,00013,00030,00066,0006,0008,00010,00012,00036,00030,00023,00035,00060,000148,00046,000Net operating income (loss)$ 32,000$ 17,000$ 24,000$ (9,000)*Allocated on the basis of sales dollars.Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or notthe line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.Aloxt

Managerial accounting is widely used by companies for various decision-making purposes and to…

Answered: 1.What is the financial advantage…

1.What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? 2. Should the production and sale of racing bikers 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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Question

1.What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?
2. Should the production and sale of racing bikers 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:
Mountain
Racing Bikes
$ 60,000
33,000
27,000
Total
Dirt Bikes
Bikes
Sales
$ 300,000
120,000
180,000
$ 90,000
27,000
63,000
$ 150,000
60,000
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
90,000
10,000
6,000
12,000
18,000
14,000
9,000
13,000
30,000
66,000
6,000
8,000
10,000
12,000
36,000
30,000
23,000
35,000
60,000
148,000
46,000
Net operating income (loss)
$ 32,000
$ 17,000
$ 24,000
$ (9,000)
*Allocated on the basis of sales dollars.
Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not
the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.
Aloxt

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