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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: 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 $ 913,000 459,000 Dirt Bikes 454,000 $ 261,000 113,000 148,000 Mountain Bikes $ 401,000 195,000 Racing Bikes $ 251,000 151,000 206,000 100,000 70,100 8,700 40,600 20,800 44,400 20,900 8,000 15,500 115,800 40,000 38,800 37,000 182,600 52,200 80,200 50,200 412,900 121,800 167,600 123,500 $ 41,100 $ 26,200 $ 38,400 $ (23,500) 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial advantage per quarter
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