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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 $ 300,000 120,000 180,000 30,000 23,000 35,000 60,000 148,000 $ 32,000 Dirt Bikes $90,000 27,000 63,000 10,000 6,000 Mountain Bikes $ 150,000 60,000 90,000 14,000 9,000 13,000 30,000 66,000 $ 17,000 $ 24,000 12,000 18,000 46,000 Racing Bikes $ 60,000 33,000 27,000 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? 6,000 8,000 10,000 12,000 36,000 $ (9,000) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out.

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 $ 300,000 120,000 180,000 30,000 23,000 35,000 60,000 148,000 $ 32,000 Dirt Bikes $90,000 27,000 63,000 10,000 6,000 Mountain Bikes $ 150,000 60,000 90,000 14,000 9,000 13,000 30,000 66,000 $ 17,000 $ 24,000 12,000 18,000 46,000 Racing Bikes $ 60,000 33,000 27,000 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? 6,000 8,000 10,000 12,000 36,000 $ (9,000) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out.

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 $ 300,000 120,000 180,000 30,000 23,000 35,000 60,000 148,000 $ 32,000 Dirt Bikes $ 90,000 27,000 63,000 10,000 6,000 12,000 18,000 46,000 $ 17,000 Management is considering discontinuing the racing bikes. The special equipment and does not wear out. Mountain Bikes $ 150,000 60,000 90,000 Racing Bikes $ 60,000 33,000 27,000 14,000 6,000 9,000 8,000 13,000 10,000 30,000 12,000 66,000 36,000 $ 24,000 $ (9,000) to produce racing bikes has no resale value 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?
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 $ 300,000 120,000 180,000 30,000 23,000 35,000 60,000 148,000 $ 32,000 Dirt Bikes $ 90,000 27,000 63,000 10,000 6,000 12,000 18,000 46,000 $ 17,000 Management is considering discontinuing the racing bikes. The special equipment and does not wear out. Mountain Bikes $ 150,000 60,000 90,000 Racing Bikes $ 60,000 33,000 27,000 14,000 6,000 9,000 8,000 13,000 10,000 30,000 12,000 66,000 36,000 $ 24,000 $ (9,000) to produce racing bikes has no resale value 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?
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