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 $ 924,000 475,000 449,000 69,800 43,600 114,800 184,800 413,000 $ 36,000 Dirt Bikes $ 264,000 114,000 150,000 Mountain Bikes $ 410,000 203,000 207,000 Racing Bikes $ 250,000 158,000 92,000 8,600 40,800 20,400 20,600 7,200 15,800 40,700 38,700 35,400 52,800 82,000 50,000 122,700 168,700 121,600 $ 27,300 $ 38,300 $ (29,600) 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?
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 $ 924,000 475,000 449,000 69,800 43,600 114,800 184,800 413,000 $ 36,000 Dirt Bikes $ 264,000 114,000 150,000 Mountain Bikes $ 410,000 203,000 207,000 Racing Bikes $ 250,000 158,000 92,000 8,600 40,800 20,400 20,600 7,200 15,800 40,700 38,700 35,400 52,800 82,000 50,000 122,700 168,700 121,600 $ 27,300 $ 38,300 $ (29,600) 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?
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 4EB: Roper Furniture manufactures office furniture and tracks cost data across their process. The...
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