The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales andexpenses for the past quarter follow:SalesVariable manufacturing and selling expensesContribution marginFixed expenses:Advertising, traceableDepreciation of special equipmentSalaries of product-line managersAllocated common fixed expenses*Total fixed expensesNet operating income (loss)*Allocated on the basis of sales dollars.TotalDirt Bikes$ 920,000469,000451,000$ 266,000111,000155,000MountainBikes$ 402,000200,000Racing Bikes$ 252,000158,000202,00094,00069,2008,40040,40020,40044,00021,0007,70015,300114,70040,30038,60035,800184,00053,20080,40050,400411,900122,900167,100121,900$ 39,100$ 32,100$ 34,900$ (27,900)Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale valueand 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 segment margin is the margin or return from each segment of the company. The allocated fixed…

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 Dirt Bikes $ 920,000 469,000 451,000 $ 266,000 111,000 155,000 Mountain Bikes $ 402,000 200,000 202,000 Racing Bikes $ 252,000 158,000 94,000 69,200 8,400 40,400 20,400 44,000 21,000 7,700 15,300 114,700 40,300 38,600 35,800 184,000 53,200 80,400 50,400 411,900 122,900 167,100 121,900 $ 39,100 $ 32,100 $ 34,900 $ (27,900) 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 Dirt Bikes $ 920,000 469,000 451,000 $ 266,000 111,000 155,000 Mountain Bikes $ 402,000 200,000 202,000 Racing Bikes $ 252,000 158,000 94,000 69,200 8,400 40,400 20,400 44,000 21,000 7,700 15,300 114,700 40,300 38,600 35,800 184,000 53,200 80,400 50,400 411,900 122,900 167,100 121,900 $ 39,100 $ 32,100 $ 34,900 $ (27,900) 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Vinubhai
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