1 11 Homework Exercise 11-2 Dropping or Retaining a Segment [L011-2) 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 Total Bikes 924,000 $262,000 $409,000 253,000 467,000 116,000 193,000158,000 457,000 -46,000 216,000 95,000 Variable manufacturing and selling Contribution nargin Pixed expenses Mvertising LEaceable Depreciation of special equlpment Salarles of prodoct-line managers Alloeated common tixed expenses* 63,200 ,2 40,100 20,900 43,700 20,900 ,500 15,300 114,50040,200 ,300 36.000 Total tet ogerating incone (loss) 1 fixed expenses 412 200 121 700 167,700 122,930 44,80024,300 48,300 (27,800) 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 hes no resale value and does not wear out Required What is the financial edventage (dsadvaryage) per quarter of discontinuing the racing bikes? 2. Should the production and sale of r 3 Prepare a properly formatted segmented income stetement that would be more useful to management in assessing the long-run profsability of the various product lines be discontinued? Complete this question by entering your answers in the tabs below. Required 1 Required 2Required 3 Prev 1ofs li Next> 5 6 8 Ul Exercise 11-3 Make or Buy Decision [L011-3] Troy Engines, Ltd, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of Engines, Ltd, for a cost of $35 per unit To evaluate this offer, Troy Engines, Ltd, has gathered the following information relating to is own cost of producing the carburetor internally Units ait Per Direet materials 14 196, 000 10 140,000 6 84.990 126.000 Variable manufacturing overhead Pixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost 456, 43 602,000 One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). L Assuming the company has no anernative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 14,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchsed, Troy Engines, Ltd, could use the freed capacity to launch a new product The segment margin of the new product would be $140.000 per year. Given this new assumption, what would be the financial advaneage (disadvantage) of buying 14,000 carburetors from the outside supplier? 4. Glven the new assumption in requirement 3, should the outside supplier's offer be accepsed? Complete this question by entering your answers in the tabs below. Required 1 Required 2Required 3 Rquired 4 ng the company h e arb aresd to poduce tchut 6