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: Racing Bikes $928,000 264,000 $ 409,000 $ 255,000 158,000 Dirt Mountain Total 472,000 456,000 Bikes 119,000 145,000 Bikes 195,000 214,000 Sales Variable manufacturing and selling expenses Contribution margin 97,000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 69,900 43,500 115,100 185,600 8,700 20,200 40,700 52,800 40,900 7,800 38,600 81,800 20,300 15,500 35,800 51,000 Total fixed expenses 414,100 122,400 169,100 122,600 Net operating income (loss) $ 41,900 $ 22,600 $ 44,900 $ (25,600) 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.

Explanation / Answer

current total total if racing bikes are dropped difference net operating income contribution margin 456000 359000 fixed expenses advertising 69900 49600 depreciation 43500 28000 salaries of product line managers 115100 79300 allocated common fixed expenses 185600 185600 total of expenses 414100 342500 net income /loss 41900 16500 25400 net income decreased by 25400 so production of racing bike should not be discontinued answer is no total dirt bike moutain bikes racing bikes contribution 456000 145000 214000 97000 tracable fixed expenses 69900 8700 40900 20300 depreciation 43500 20200 7800 15500 salaries of product line managers 115100 40700 38600 35800 total tracable expenses 228500 69600 87300 71600 net income/loss 227500 75400 126700 25400 ANSWER 2B IS YES

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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