Bikelites Company Is Considering Eliminating Model AE1 from Its Rear

question 126

Essay

Bikelites Company is considering eliminating Model AE1 from its rear lights line because of losses over the past quarter.The past three months of information for model AE1 is summarised below:
$$\begin{array} { l r } \text { Sales (2000 units) } & \$ 500000 \\\text { Manufacturing costs: } & \\\quad \text { Direct materials } & 280000 \\\text { Direct labour ( } \$ 15 \text { per hour) } & 60000 \\\text { Support } & 200000 \\\text { Operating loss } & ( \$ 40000 )\end{array}$$
Support costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE1 that has no resale value.
Should Bikelites Company eliminate Model AE1 from its product line? Why or why not?

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Definitions:

Employee Relations

The management of the relationship between employers and employees, focusing on maintaining healthy, productive, and legally compliant interactions.

Confidentiality

The requirement to keep certain information secret or private, often to protect personal data or sensitive corporate information.

Competitive Advantage

This refers to the attributes that allow an organization to outperform its competitors, such as superior technology, skilled workforce, or better customer service.

Skills and Technologies

The abilities and tools required to effectively perform tasks or jobs in the modern workplace, often involving digital competencies and technical expertise.