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 $ 929,000 Dirt Bikes 469,000 $ 268,000 115,000 460,000 153,000 Mountain Bikes $ 408,000 199,000 209,000 Racing Bikes $ 253,000 155,000 98,000 69,800 8,400 40,500 20,900 43,600 20,500 7,400 15,700 114,900 41,000 38,800 35,100 185,800 53,600 81,600 50,600 414,100 123,500 168,300 122,300 $ 45,900 $ 29,500 $ 40,700 $ (24,300) 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 $ 929,000 Dirt Bikes 469,000 $ 268,000 115,000 460,000 153,000 Mountain Bikes $ 408,000 199,000 209,000 Racing Bikes $ 253,000 155,000 98,000 69,800 8,400 40,500 20,900 43,600 20,500 7,400 15,700 114,900 41,000 38,800 35,100 185,800 53,600 81,600 50,600 414,100 123,500 168,300 122,300 $ 45,900 $ 29,500 $ 40,700 $ (24,300) 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)
*Allocated on the basis of sales dollars.
Total
$ 929,000
469,000
460,000
Dirt Bikes
$ 268,000
115,000
153,000
Mountain
Bikes
$ 408,000
199,000
Racing Bikes
$ 253,000
155,000
209,000
98,000
69,800
8,400
40,500
20,900
43,600
20,500
7,400
15,700
114,900
41,000
38,800
35,100
185,800
53,600
81,600
50,600
414,100
123,500
168,300
122,300
$ 45,900
$ 29,500
$ 40,700 $ (24,300)
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?
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