The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data onsales and expenses for the past quarter follow:SalesVariable manufacturing and selling expensesContribution margin.Fixed expenses:Advertising, traceableDepreciation of special equipmentSalaries of product-line managersAllocated common fixed expenses*Total fixed expensesNet operating income (loss)"Allocated on the basis of sales dollars.TotalDirt Bikes$ 927,000478,000449,000$ 266,000115,000151,000MountainBikes$ 409,000204,000205,000Racing Bikes$ 252,000159,00093,00069,2008,20040,20020,80042,70020,2007,40015,100115,00040,70038,00036,300185,40053,20081,80050,400412,300122,300167,400122,600$ 36,700$ 28,700 $ 37,600 $ (29,600)Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has noresale 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?Complete this question by entering your answers in the tabs below.

Solution:-The inquiry concerns whether the Regal Cycle Company should halt the manufacturing and…

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 Dirt Bikes $ 927,000 478,000 449,000 $ 266,000 115,000 151,000 Mountain Bikes $ 409,000 Racing Bikes $ 252,000 204,000 159,000 205,000 93,000 69,200 8,200 40,200 20,800 42,700 20,200 7,400 15,100 115,000 40,700 38,000 36,300 185,400 53,200 81,800 50,400 412,300 122,300 167,400 122,600 $ 36,700 $ 28,700 $ 37,600 $ (29,600) 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 Dirt Bikes $ 927,000 478,000 449,000 $ 266,000 115,000 151,000 Mountain Bikes $ 409,000 Racing Bikes $ 252,000 204,000 159,000 205,000 93,000 69,200 8,200 40,200 20,800 42,700 20,200 7,400 15,100 115,000 40,700 38,000 36,300 185,400 53,200 81,800 50,400 412,300 122,300 167,400 122,600 $ 36,700 $ 28,700 $ 37,600 $ (29,600) 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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