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 $ 928,000 472,000 456,000 69,400 44,500 116,100 185,600 415,600 $ 40,400 Required 1 Required 2 Dirt Bikes $ 268,000 116,000 152,000 Complete this question by entering your answers in the tabs below. 8,500 20,600 41,000 53,600 123,700 $ 28,300 Mountain Bikes $ 403,000 200,000 203,000 40,400 8,000 38,300 80,600 167,300 $ 35,700 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? Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter Racing Bikes $ 257,000 156,000 101,000 20,500 15,900 36,800 51,400 124,600 $ (23,600)
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 $ 928,000 472,000 456,000 69,400 44,500 116,100 185,600 415,600 $ 40,400 Required 1 Required 2 Dirt Bikes $ 268,000 116,000 152,000 Complete this question by entering your answers in the tabs below. 8,500 20,600 41,000 53,600 123,700 $ 28,300 Mountain Bikes $ 403,000 200,000 203,000 40,400 8,000 38,300 80,600 167,300 $ 35,700 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? Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter Racing Bikes $ 257,000 156,000 101,000 20,500 15,900 36,800 51,400 124,600 $ (23,600)
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
$ 928,000
472,000
456,000
69,400
44,500
116, 100
185,600
415,600
$ 40,400
Required 1
Complete this question by entering your answers in the tabs below.
Required 2
Dirt Bikes
$ 268,000
116,000
152,000
Mountain
Bikes
$ 403,000
200,000
203,000
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?
40,400
8,000
38,300
80,600
167,300
8,500
20,500
20,600
15,900
41,000
36,800
53,600
51,400
123,700
124,600
$ 28,300 $ 35,700 $ (23,600)
Racing Bikes
$ 257,000
156,000
101,000
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Financial (disadvantage) per quarter
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