The Regal Cycle Company manufactures three types of bic expenses for the past quarter follow: Mountain Racing Bikes Dirt Bikes $ 266,000 113, еее 153,000 Bikes $ 409,000 203,000 206,e00 Total 929, eee 470, e00 459, e00 $ 254, 000 154, еее 100, e00 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 70,000 43,700 114,500 185,800 9,e00 20,400 40,500 53,200 40,800 7,800 38,700 81,800 169,100 20, 200 15,500 35,300 50,800 121, 800 414,000 123,100 $ 29,900 Net operating income (loss) $ 45,000 $ 36,900 $ (21,800) "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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1. What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? 
2.Should the production and sales 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 an
expenses for the past quarter follow:
Mountain
Bikes
Racing Bikes
Total
Dirt Bikes
$ 929,000
470,000
$ 266,000
113,000
153,000
$ 409,000
203,000
$ 254,000
154,000
100,000
Sales
Variable manufacturing and selling expenses
Contribution margin
459,000
206,000
ok
Fixed expenses:
Advertising, traceable
Depreciation of special equipment
Salaries of product-line managers
Allocated common fixed expenses*
Total fixed expenses
70,000
43,700
114,500
185,800
414,000
9,000
20,400
40,500
53,200
123,100
40,800
7,800
38,700
81,800
169,100
20,200
15,500
35,300
50,800
nt
121,800
Net operating income (loss)
$ 45,000
$ 29,900
$36,900
$ (21,800)
"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.
Required:
< Prev
3 of 4
Next >
DELL
5:
4/14
Transcribed Image Text:The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales an expenses for the past quarter follow: Mountain Bikes Racing Bikes Total Dirt Bikes $ 929,000 470,000 $ 266,000 113,000 153,000 $ 409,000 203,000 $ 254,000 154,000 100,000 Sales Variable manufacturing and selling expenses Contribution margin 459,000 206,000 ok Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 70,000 43,700 114,500 185,800 414,000 9,000 20,400 40,500 53,200 123,100 40,800 7,800 38,700 81,800 169,100 20,200 15,500 35,300 50,800 nt 121,800 Net operating income (loss) $ 45,000 $ 29,900 $36,900 $ (21,800) "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. Required: < Prev 3 of 4 Next > DELL 5: 4/14
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