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 $ 924,000 475,000 449,000 69,800 43,600 114,800 184,800 413,000 $ 36,000 Dirt Bikes $ 264,000 114,000 150,000 Mountain Bikes $ 410,000 203,000 207,000 Racing Bikes $ 250,000 158,000 92,000 8,600 40,800 20,400 20,600 7,200 15,800 40,700 38,700 35,400 52,800 82,000 50,000 122,700 168,700 121,600 $ 27,300 $ 38,300 $ (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 $ 924,000 475,000 449,000 69,800 43,600 114,800 184,800 413,000 $ 36,000 Dirt Bikes $ 264,000 114,000 150,000 Mountain Bikes $ 410,000 203,000 207,000 Racing Bikes $ 250,000 158,000 92,000 8,600 40,800 20,400 20,600 7,200 15,800 40,700 38,700 35,400 52,800 82,000 50,000 122,700 168,700 121,600 $ 27,300 $ 38,300 $ (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?
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)
Total
$ 924,000
475,000
449,000
69,800
43,600
114,800
184,800
413,000
$ 36,000
Required 1 Required 2
Dirt Bikes
$ 264,000
114,000
150,000
Complete this question by entering your answers in the tabs below.
< Required 1
Mountain
Bikes
$ 410,000
203,000
207,000
*Allocated on the basis of sales dollars.
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?
8,600
20,400
20,600
15,800
40,700
35,400
52,800
50,000
122,700
121,600
$ 27,300 $ 38,300 $ (29,600)
40,800
7,200
38,700
82,000
168,700
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Required 2 >
Racing Bikes
$ 250,000
158,000
92,000
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