All answers shown are correct. Please help fill in the blanks. The Regal Cycle C

Question

All answers shown are correct. Please help fill in the blanks.

The Regal Cycle Company manufactures three types of bicyces-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow Dirt Bikes S 263,D0 111,000 Mountain Bikes 5 409 D0 92.000 Racing Bikes 5257 DO 54,000 103 DO Total Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses 457,000 472,000 8,100 20,200 41,000 4D,700 7.300 0,200 2D 200 15,300 35,700 51400 69,000 Depreciation of special equipment Salaries of product-line managers llocaled cammon fixed expenses 42,800 114,900 Total fixed expenses 412,500 121,900 168,D00 122,800 Nel operating income (lass) 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 shouid 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 discontinuing racing bikes? (Decreases should be indicated by a minus sign.) Total If Racing Bikes Are Operating Income Current Total 929,0003 457,000 472 000 672,000 303,000 369 000 257,000 154.000 (103,000) ales ariable manufacturing and seing expenses Contribution margin (loss) Fxed expenses 20 200 Advertising, traceable Depreciation on special equipment Sal aries of product managers Common allocated costs 69 co0 42.800 114,900 185,800 412.500 48,800 79.200 35.700 128,000 241,000 3 55.900 47,100) Total fixed expenses Net operating income (lass) 59,5003

Explanation / Answer

1a Current Total Total If Racing Bikes Are Dropped Difference: NetOperatingIncome Sales 929000 672000 -257000 Variable manufacturing and selling expenses 457000 303000 154000 Contribution margin (loss) 472000 369000 -103000 Fixed expenses: Advertising, traceable 69000 48800 20200 Depreciation on special equipment 42800 42800 0 Salaries of product manager 114900 79200 35700 Common allocated costs 185800 185800 0 Total fixed expenses 412500 356600 55900 Net operating income (loss) 59500 12400 -47100 1b No 2a Total Dirt Bikes Mountain Bikes Racing Bikes Sales 929000 263000 409000 257000 Variable manufacturing and selling expenses 457000 111000 192000 154000 Contribution margin (loss) 472000 152000 217000 103000 Traceable fixed expenses: Advertising, traceable 69000 8100 40700 20200 Depreciation on special equipment 42800 20200 7300 15300 Salaries of product manager 114900 41000 38200 35700 Total traceable fixed expenses 226700 69300 86200 71200 Product line segment margin 245300 82700 130800 31800 Common fixed expenses 185800 Net operating income (loss) 59500

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