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Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 925,000 Dirt Bikes 468,000 457,000 $ 268,000 117,000 151,000 Mountain Bikes $ 403,000 194,000 209,000 Racing Bikes $ 254,000 157,000 97,000 69,500 8,500 40,500 20,500 44,100 20,600 7,600 15,900 114,500 40,800 38,400 35,300 185,000 53,600 80,600 50,800 413,100 123,500 167,100 122,500 $ 43,900 $ 27,500 $ 41,900 $ (25,500) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? Complete this question by entering your answers in the tabs below.

Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 925,000 Dirt Bikes 468,000 457,000 $ 268,000 117,000 151,000 Mountain Bikes $ 403,000 194,000 209,000 Racing Bikes $ 254,000 157,000 97,000 69,500 8,500 40,500 20,500 44,100 20,600 7,600 15,900 114,500 40,800 38,400 35,300 185,000 53,600 80,600 50,800 413,100 123,500 167,100 122,500 $ 43,900 $ 27,500 $ 41,900 $ (25,500) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? Complete this question by entering your answers in the tabs below.

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter8: Tactical Decision-making And Relevant Analysis
Section: Chapter Questions
Problem 45E
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Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 925,000 Dirt Bikes 468,000 457,000 $ 268,000 117,000 151,000 Mountain Bikes $ 403,000 194,000 209,000 Racing Bikes $ 254,000 157,000 97,000 69,500 8,500 40,500 20,500 44,100 20,600 7,600 15,900 114,500 40,800 38,400 35,300 185,000 53,600 80,600 50,800 413,100 123,500 167,100 122,500 $ 43,900 $ 27,500 $ 41,900 $ (25,500) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 925,000 Dirt Bikes 468,000 457,000 $ 268,000 117,000 151,000 Mountain Bikes $ 403,000 194,000 209,000 Racing Bikes $ 254,000 157,000 97,000 69,500 8,500 40,500 20,500 44,100 20,600 7,600 15,900 114,500 40,800 38,400 35,300 185,000 53,600 80,600 50,800 413,100 123,500 167,100 122,500 $ 43,900 $ 27,500 $ 41,900 $ (25,500) Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? Complete this question by entering your answers in the tabs below.
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