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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 $ 921,000 470,000 451,000 Dirt Bikes $267,000 115,000 152,000 Mountain Bikes $ 402,000 196,000 206,000 Racing Bikes $ 252,000 159,000 93,000 69,000 8,200 40,500 20,300 43,300 20,300 7,600 15,400 114,600 40,300 38,100 36,200 184,200 411,100 53,400 122,200 80,400 50,400 166,600 122,300 $ 39,900 $ 29,800 $ 39,400 $ (29,300) 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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