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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 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. $931,000 200.000 407.000 255.000 Variable manufacturing and selling expenses ll l 457.000 113,000 193.000 151.000 Contribution margin 474 000 150,000 214.000 104,000 Fixed expenses: 8.000 40,600 20,700 Advertising Depreciation of special equipment 00,000 43,700 Salaries of product-ine managers 38,700 114,800 40,300 35.800 186.200 53,800 81,400 51.000 Allocated common fixed expenses" Total fixed expenses 414.000 123,500 168,400 122.700 Net operating income (loss) S 50.400 32.500 45.000 (18.700) Alocated on the basis of sales dollars. Management is ooncerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the tine should be discontinued, The special equipment used to produce racing bikes has no resale value and does not wear out. la. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) Total If Current Total Racing Bikes operating Are Dropped or (Decrease) Contribution margin (loss) Fixed expenses: Total fixed expenses Net operating income (oss) 0 1b Should production and sale of the raoing b es be
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