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2 The Regol Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for
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The Regol 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 $ 924,000 459,000 465,08 Dirt Bikes $266,000 112.000 154,00 Mountain Bikes $ 464,800 190,000 214,200 Racing Bikes $ 254,000 157.100 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) 69,8808 ,560 43,300 20,700 113,600 40,000 184,800 53.209 611, 5ee 122,48e 53,500 $ 31,600 40,800 20,500 7,320 15,300 38,300 35,300 50, 500 50,500 167,200 121,900 $ 46,500 $(24,900) $ "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. Required: 1 What is the financial advantage (disadvantagel 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 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Sales Contribution margin (loss) Traceable fed expenses Total traceable fred expenses Product line segment margin (loss) DO SOS Net operating income (loss) Step by Step Solution
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