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The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for
The Regal Cycle Company manufactures three types of bicyclesa 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 $ 925,000 468,000 Dirt Bikes 457,000 $ 265,000 115,000 150,000 Mountain Bikes $ 405,000 Racing Bikes $ 255,000 198,000 207,000 155,000 100,000 70,000 8,700 40,400 20,900 43,500 20,500 7,800 15,200 115,800 40,700 38,300 36,800 185,000 53,000 81,000 51,000 414,300 122,900 167,500 123,900 $ 42,700 $ 27,100 $ 39,500 $ (23,900) 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? < Required 1 Required 2 >
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