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: B ices 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 $ 922,000 465,000 $ 263,000 114,000 Mountain Bikes $ 408,000 Racing Bikes $ 251,000 457,000 149,000 199,000 209,000 152,000 99,000 69,800 8,900 40,700 20,200 43,300 20,400 7,300 15,600 115,500 40,700 38,600 36,200 184,400 52,600 413,000 122,600 81,600 168,200 50,200 122,200 $ 44,000 $ 26,400 $ 40,800 $ (23,200) 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: B ices 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 $ 922,000 465,000 $ 263,000 114,000 Mountain Bikes $ 408,000 Racing Bikes $ 251,000 457,000 149,000 199,000 209,000 152,000 99,000 69,800 8,900 40,700 20,200 43,300 20,400 7,300 15,600 115,500 40,700 38,600 36,200 184,400 52,600 413,000 122,600 81,600 168,200 50,200 122,200 $ 44,000 $ 26,400 $ 40,800 $ (23,200) 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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Regal Cycle Company Discontinuing Racing Bikes Analysis 1 Financial Advantage of Discontinuing Racin... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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