The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a moun

Question

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:

Mountain

Bikes

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.

What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.)

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:

Explanation / Answer

1a Current Total Total If Racing Bikes Are Dropped Difference: NetOperatingIncome Sales 925000 670000 -255000 Variable manufacturing and selling expenses 469000 317000 152000 Contribution margin (loss) 456000 353000 -103000 Fixed expenses: Advertising, traceable 70100 49200 20900 Depreciation on special equipment 44100 44100 0 Salaries of product manager 115600 79000 36600 Common allocated costs 185000 183800 1200 Total fixed expenses 414800 356100 58700 Net operating income (loss) 41200 -3100 -44300 2a Total Dirt Bikes Mountain Bikes Racing Bikes Sales 925000 262000 408000 255000 Variable manufacturing and selling expenses 469000 115000 202000 152000 Contribution margin (loss) 456000 147000 206000 103000 Traceable fixed expenses: Advertising, traceable 70100 8800 40400 20900 Depreciation on special equipment 44100 20600 7600 15900 Salaries of product manager 115600 40300 38700 36600 Total traceable fixed expenses 229800 69700 86700 73400 Product line segment margin 226200 77300 119300 29600 Common fixed expenses 185000 Net operating income (loss) 41200

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.