Answered step by step
Verified Expert Solution
Question
1 Approved Answer
These are the options for the 1a. These are the options for the 2a. The Regal Cycle Company manufactures three types of bicycles-a dirt bike,
These are the options for the 1a.
These are the options for the 2a.
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 Dirt Mountain Racing Total 481,000 450,000 Bikes 119,000 150,000 Bikes 206,000 197,000 Bikes 156,000 103,000 $931,000 $ 269,000 $ 403,000 $ 259,000 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* 69,500 44,500 114,800 186,200 8,700 20,900 40,600 53,800 40,100 7,800 38,900 80,600 20,700 15,800 35,300 51,800 Total fixed expenses 415,000 124,000 167,400 123,600 Net operating income (loss) $ 35,000 $ 26,000 $ 29,600 $ (20,600) 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: 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started