The Regal Cycle Company manufactures three types of bicycles a dirt bike, a mountain bike,...
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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 Total $ 928,000 471,000 Dirt Bikes $ 270,000 119,000 151,000 Mountain Bikes Bikes $ 408,000 $250,000 196,000 156,000 212,000 94.000 457,000 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 68,600 44,000 114,900 185,600 8,200 20,800 40.300 54,000 40,200 7,300 38,700 81,600 20200 15,900 35,900 50,000 Total fixed expenses 413,100 123,300 167,800 122,000 Net operating income (loss) $ 43,900 $ 27,700 $ 44,200 $ (28,000 *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
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