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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 Dirt Bikes Mountain Bikes Racing Bikes $ $ 917,000 $ 262,000 $ 251,000 404,000 484,000 119,000 209,000 156,000 433,000 143,000 195,000 95,000 70,300 8,800 41,000 20,500 43,800 20,600 7,300 15,900 115,400 40,600 38,900 35,900 183,400 52,400 80,800 50,200 412,900 122,400 168,000 122,500 $ 20,100 $ 20,600 $27,000 $ (27,500) 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? Required 1 Required 2 >
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