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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 $ 930,000 476,000 454,000 Dirt Bikes $ 267,000 113,000 154,000 Mountain Bikes $ 407,000 209,000 198,000 Racing Bikes $ 256,000 154,000 102,000 70,500 8,600 40,900 21,000 44,400 20,400 8,000 16,000 116,100 40,900 38,600 36,600 186,000 53,400 81,400 51,200 417,000 123,300 168,900 124,800 $ 37,000 $ 30,700 $ 29,100 $ (22,800) 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.

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 $ 930,000 476,000 454,000 Dirt Bikes $ 267,000 113,000 154,000 Mountain Bikes $ 407,000 209,000 198,000 Racing Bikes $ 256,000 154,000 102,000 70,500 8,600 40,900 21,000 44,400 20,400 8,000 16,000 116,100 40,900 38,600 36,600 186,000 53,400 81,400 51,200 417,000 123,300 168,900 124,800 $ 37,000 $ 30,700 $ 29,100 $ (22,800) 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 $ 930,000 476,000 454,000 Dirt Bikes $ 267,000 113,000 154,000 Mountain Bikes $ 407,000 209,000 198,000 Racing Bikes $ 256,000 154,000 102,000 70,500 8,600 40,900 21,000 44,400 20,400 8,000 16,000 116,100 40,900 38,600 36,600 186,000 53,400 81,400 51,200 417,000 123,300 168,900 124,800 $ 37,000 $ 30,700 $ 29,100 $ (22,800) 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.
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 $ 930,000 476,000 454,000 Dirt Bikes $ 267,000 113,000 154,000 Mountain Bikes $ 407,000 209,000 198,000 Racing Bikes $ 256,000 154,000 102,000 70,500 8,600 40,900 21,000 44,400 20,400 8,000 16,000 116,100 40,900 38,600 36,600 186,000 53,400 81,400 51,200 417,000 123,300 168,900 124,800 $ 37,000 $ 30,700 $ 29,100 $ (22,800) 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.
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