The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a...
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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 Dirt Bikes $ 920,000 470,000 450,000 $ 265,000 116,000 149,000 Mountain Bikes $ 402,000 198,000 204,000 Racing Bikes $ 253,000 156,000 97,000 69,500 8,400 40,800 20,300 43,400 20,600 7,500 15,300 114,900 40,100 38,600 36,200 184,000 53,000 80,400 50,600 411,800 122,100 167,300 122,400 $ 38,200 $ 26,900 $ 36,700 $ (25,400) 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 $ 920,000 470,000 450,000 $ 265,000 116,000 149,000 Mountain Bikes $ 402,000 198,000 204,000 Racing Bikes $ 253,000 156,000 97,000 69,500 8,400 40,800 20,300 43,400 20,600 7,500 15,300 114,900 40,100 38,600 36,200 184,000 53,000 80,400 50,600 411,800 122,100 167,300 122,400 $ 38,200 $ 26,900 $ 36,700 $ (25,400) 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?
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Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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