10.00 points The Regal Cycle Company manufactures three types of bicycles-a dirt

Question

10.00 points 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: Bikes S 921,000 $ 269,000 $401,000 251,000 471,000 119,000 194,000 158,000 Contribution margin 450,000 150,000 207,000 93,000 69,600 8,700 40,300 20,600 7,600 15,800 38,700 36,800 184,200 53,800 80,200 50,200 of special equipment 43,600 116,000 20,200 40,500 Total fixed expenses Allocated on the basis of sales dollars the 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

Explanation / Answer

                        (19,800)

Current total total if racing bikes are dropped Diff Increase or Decrease Sales 921000 670000                      (251,000) Variable cost 471000 313000                      (158,000) Conribution 450000 357000                         (93,000) Fixed Expenses Advertisement 69600 49000                         (20,600) Depreciation 43600 27800                         (15,800) Salary 116000 79200                         (36,800) Common Fixed expenses 184200 184200                                    -   Total Fixed expenses 413400 340200                         (73,200) Net Operating Income 36600 16800

                        (19,800)

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