The Regal Cycle Company manufactures thvee types of blcycles-a dirt blke, a moun

Question

The Regal Cycle Company manufactures thvee types of blcycles-a dirt blke, a mountain bike, and a racing bike. Deta on sales and expenses for the past quarter follow 8.33 totalBikes BikesBikes Sales variable manufacturing and.elling $920,000 $262,000 $406,000 ?.coo 252,0 ?ss,000 411,000119,100 Contribution margin 0,9008,90041,00021,00D Salaries of preduct-line macagers 114,600 38,800 35,600 40,200 Total tixed expenses Set operating Lncone (loss) 25,900 20,600 34,500 $(29,200) %located on the basis of sales dollars. References Management is concerned sbout the continued losses shown by the racing bikes and wants a recommendation as to whether or not be discontinued. The specialecipment used to produce racing bikes has no resale value and does not wear out Required ?What is the francial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a property formated proftability of the verious product lines segmented income statement that would be more useful to management in assessing the long-run Complete this question by entering your answers in the tabs below. RquRequred 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

Explanation / Answer

1. Financial advantage (disadvantage) per quarter: ($36400)

2. No.

The production and sale of racing bikes should not be discontinued as it will result in a loss.

3.

Current Total Total If Racing Bikes Are Dropped Difference:
Financial advantage (disadvantage) Sales 920000 668000 -252000 Variable manufacturing and selling expenses 481000 322000 159000 Contribution margin (loss) 439000 346000 -93000 Fixed expenses: Advertising, traceable 70900 49900 21000 Depreciation on special equipment 43600 43600 0 Salaries of product-line managers 114600 79000 35600 Allocated common fixed expenses 184000 184000 0 Total fixed expenses 413100 356500 56600 Net operating income (loss) 25900 -10500 -36400

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