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Can someone please help me with this accounting question? Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] The Regal Cycle Company manufactures three types
Can someone please help me with this accounting question?
Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: Dirt Mountain Racing Total Bikes Bikes Bikes $ 928,000 $269,000 $ 408,000 $ 251,000 465,000 116,000 198,000 151,000 463,000 153,000 210,000 100,000 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* Total fixed expenses Net operating income (loss) 69,800 8,600 43, 400 20,600 115,800 40,600 185,600 53,800 414,600 123,600 $ 48,400 $ 29,400 40,300 20,900 7,300 15,500 38,300 36,900 81,600 50,200 167,500 123,500 42,500 $(23,500) *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 (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 linesStep by Step Solution
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