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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
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 Dirt Mountain Racing Bikes Bikes Bikes $931,000 $263,000 $400,000 $260,000 476,000 117,000 202,000 157,000 455,000 146,000 206,000 103,000 70,100 8,500 40,700 43,300 20,900 7,200 114,500 40,600 186,200 52,600 414,100 122,600 20,900 15,200 38,500 35,400 81,600 52,000 168,000 123,500 $ 40,900 $23,400 $ 38,000 $(20,500) 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: 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 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 (disadvantage) per quarter
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