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s-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Dirt Bikes Mountain Bikes acing
s-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Dirt Bikes Mountain Bikes acing Bikes Total $930,000 270,000 $ 403,000 $257,000 463,000 115,000 193,000 155,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 467,000 155,000 210,000 102,000 8,300 40,600 20,500 7,800 15,200 115,200 40,500 38,900 35,800 186,00054,000 80,600 51,400 69,400 43,60020,600 Advertising, traceable Depreciation of special equipment Salaries of product-line managers common fix Total fixed expenses 414,200 123,400 167,900 122,900 Net operating income (loss) $ 52,800 31,600 S 42,100 S (20,900) Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out Required 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) Difference: Net Operating Total If Racing BikesIncome Are Dropped Current Total Increase or (Decrease) Contribution margin (loss) Fixed expenses
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