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: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses 120,000 27,000 60,000 33,000 Contribution margin 180,000 63,000 90,000 27,000 Fixed expenses: Advertising, traceable 30,000 10,000 14,000 6,000 Depreciation of special equipment 23,000 6,000 9,000 8,000 Salaries of product-line managers 35,000 12,000 13,000 10,000 Allocated common fixed expenses* 60,000 18,000 30,000 12,000 Total fixed expenses 148,000 46,000 66,000 36,000 Net operating income (loss) $32,000 $17,000 $24,000 $(9,000) *Allocated on the basis of sale 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: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses 120,000 27,000 60,000 33,000 Contribution margin 180,000 63,000 90,000 27,000 Fixed expenses: Advertising, traceable 30,000 10,000 14,000 6,000 Depreciation of special equipment 23,000 6,000 9,000 8,000 Salaries of product-line managers 35,000 12,000 13,000 10,000 Allocated common fixed expenses* 60,000 18,000 30,000 12,000 Total fixed expenses 148,000 46,000 66,000 36,000 Net operating income (loss) $32,000 $17,000 $24,000 $(9,000) *Allocated on the basis of sale 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $300,000 $90,000
$150,000 $60,000 Variable manufacturing and selling expenses 120,000 27,000 60,000 33,000 Contribution margin
180,000 63,000 90,000 27,000 Fixed expenses: Advertising, traceable 30,000 10,000 14,000 6,000 Depreciation of
special equipment 23,000 6,000 9,000 8,000 Salaries of product-line managers 35,000 12,000 13,000 10,000 Allocated
common fixed expenses* 60,000 18,000 30,000 12,000 Total fixed expenses 148,000 46,000 66,000 36,000 Net
operating income (loss) $32,000 $17,000 $24,000 $(9,000) *Allocated on the basis of sale
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?
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