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The Wheels R' Us Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for
The Wheels R' Us 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: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $ 924,000 $ 265,000 $ 409,000 $ 250,000 Variable manufacturing and selling expenses 470,000 117,000 196,000 157,000 Contribution margin 454,000 148,000 213,000 93,000 Fixed expenses: Advertising, traceable 69,300 8,800 40,200 20,300 Depreciation of special equipment 43,400 20,200 7,700 15,500 Salaries of product-line managers 115,200 40,700 38,100 36,400 Allocated common fixed expenses* 184,800 53,000 81,800 50,000 Total fixed expenses 412,700 122,700 167,800 122,200 Net operating income (loss) $ 41,300 $ 25,300 $ 45,200 $ (29,200) *Allocated on the basis of sales dollars. 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: What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Put in a negative number with a "-" sign to indicate a financial disadvantage. Should the production and sale of racing bikes be discontinued
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