The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a...
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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: 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 Dirt Bikes $ 923,000 480,000 443,000 $ 264,000 116,000 148,000 Mountain Bikes $ 401,000 205,000 Racing Bikes $ 258,000 159,000 196,000 99,000 70,100 8,700 40,800 20,600 43,100 20,200 7,300 15,600 115,200 40,800 38,200 36,200 184,600 52,800 80,200 51,600 413,000 122,500 166,500 124,000 $ 30,000 $ 25,500 $ 29,500 $ (25,000) 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. 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? 3. Prepare a properly formatted segmented Income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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 Dirt Bikes $ 923,000 480,000 443,000 $ 264,000 116,000 148,000 Mountain Bikes $ 401,000 205,000 Racing Bikes $ 258,000 159,000 196,000 99,000 70,100 8,700 40,800 20,600 43,100 20,200 7,300 15,600 115,200 40,800 38,200 36,200 184,600 52,800 80,200 51,600 413,000 122,500 166,500 124,000 $ 30,000 $ 25,500 $ 29,500 $ (25,000) 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. 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? 3. Prepare a properly formatted segmented Income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
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Required 1 Financial Advantage Disadvantage of Discontinuing Racing Bikes If the Racing Bikes line is discontinued the company will avoid the following expenses Variable manufacturing and selling expe... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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