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 $ 923,000 467,000 456,000 69,400 43,700 116, 100 184,600 413,800 $ 42,200 Dirt Bikes $ 261,000 119,000 142,000 Mountain Bikes $ 405,000 197,000 208,000 8,900 40,400 20,100 8,000 40,600 38,500 52,200 81,000 121,800 167,900 $ 20,200 $ 40,100 Racing Bikes $ 257,000 151,000 106,000 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? 20,100 15,600 37,000 51,400 124, 100 $ (18,100) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not
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 $ 923,000 467,000 456,000 69,400 43,700 116, 100 184,600 413,800 $ 42,200 Dirt Bikes $ 261,000 119,000 142,000 Mountain Bikes $ 405,000 197,000 208,000 8,900 40,400 20,100 8,000 40,600 38,500 52,200 81,000 121,800 167,900 $ 20,200 $ 40,100 Racing Bikes $ 257,000 151,000 106,000 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? 20,100 15,600 37,000 51,400 124, 100 $ (18,100) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 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
$923,000
467,000
456,000
69,400
43,700
116, 100
184,600
413,800
$ 42,200
Mountain
Bikes
Dirt Bikes
$261,000 $ 405,000
197,000
208,000
119,000
142,000
40,400
8,000
8,900
20,100
40,600
38,500
52,200
81,000
121,800
167,900
$ 20,200 $ 40,100
Racing Bikes
$ 257,000
151,000
106,000
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?
20,100
15,600
37,000
51,400
124, 100
$(18,100)
Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no
resale value and does not wear out.
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