#12 ter 10 Homework × C D Not secure ezto.mheducation.com/hm.tpx The Regal Cycle
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#12
ter 10 Homework × C D Not secure ezto.mheducation.com/hm.tpx 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 Bikes s 926,00D $ 263000 405.000 258,000 81,000 111,000 210,000 160,000 Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin 445,000152,000 195,000 98,000 Fixed expenses Advertising, traceable Depreciation of special equip Salaries of product-line managers Allocated common fixed expenses 69 500 115 10020.30040 500 69 500 8 20040 50020 80 43,00020300 7,50015.200 185 200 52,600 81,000 51,600 412 800 121.200167 300124.300 S 32 200 30 800 27.700 (26.300) Total fixed expenses Net operating income (loss) 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: a whit s the mpet operating income by discontinuing racing bikes? (Decreases should t indicated by a minus sign.) Total If Racing Difference: Net Current Total loBkerating Income Increase or Decrease Dropped ales 926,000 481 000 445,000 ariable manufacturing and selling expenses Contribution margin (loss) Fixed expenses 69 500 43.000 115 100 185 200 412,800 Advertising. traceable Depreciation on special equipment Salaries of product managers Common allocated costs Total fixed expenses Net operating income (loss) 2 200 S 1b. Should production and sale of the racing bikes be discontinued? O Yes ALExplanation / Answer
1.a.
1.b. no. Production should be continued as if it is discontinued then company have to face a loss of $8,300 overall.
Current total total if racing bikes are dropped difference: net operating income increase or (decrease) Sales $926,000 $668,000 (258,000) Variable manufacturing and selling expenses $481,000 $321,000 $160,000 Contribution margin(loss) $445,000 $347,000 (98,000) Fixed expenses: Advertising traceable $69,500 $48,700 $20,800 Depreciation on special equipment $43,000 $43,000 0 Salaries of product managers $115,100 $78,400 $36,700 Common allocated costs $185,200 $185,200 0 Total fixed expenses $412,800 $355,300 $57,500 Net operating income(loss) $32,200 (8,300) (40,500)Related Questions
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