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 $ 926,000 Dirt Bikes 468,000 $ 269,000 111,000 Mountain Bikes $ 405,000 206,000 Racing Bikes $ 252,000 151,000 458,000 158,000 199,000 101,000 69,800 8,800 40,700 20,300 43,700 20,400 7,400 15,900 114,200 40,700 38,400 35,100 185,200 53,800 81,000 50,400 412,900 123,700 167,500 121,700 $ 45,100 $ 34,300 $ 31,500 $ (20,700) 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter
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 $ 926,000 Dirt Bikes 468,000 $ 269,000 111,000 Mountain Bikes $ 405,000 206,000 Racing Bikes $ 252,000 151,000 458,000 158,000 199,000 101,000 69,800 8,800 40,700 20,300 43,700 20,400 7,400 15,900 114,200 40,700 38,400 35,100 185,200 53,800 81,000 50,400 412,900 123,700 167,500 121,700 $ 45,100 $ 34,300 $ 31,500 $ (20,700) 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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
$ 926,000
Dirt Bikes
468,000
$ 269,000
111,000
Mountain
Bikes
$ 405,000
206,000
Racing Bikes
$ 252,000
151,000
458,000
158,000
199,000
101,000
69,800
8,800
40,700
20,300
43,700
20,400
7,400
15,900
114,200
40,700
38,400
35,100
185,200
53,800
81,000
50,400
412,900
123,700
167,500
121,700
$ 45,100
$ 34,300 $ 31,500 $ (20,700)
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?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Financial (disadvantage) per quarter
<Required 1
Required 2 >
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