Chapter 11 Homework i Saved 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: points Dirt Mountain Racing Total Bikes Bikes Bikes $928,000 $269,000 $ 404,000 $ 255,000 477,000 112,000 207,000 158,000 451,000 157,000 197,000 97,000 Skipped 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) eBook 69,500 8,800 40,300 20,400 44,400 20,800 7,900 15,700 114,100 40,700 38,000 35,400 185,600 53,800 80,800 51,000 413,600 124,100 167,000 122,500 $ 37,400 $ 32,900 $ 30,000 $(25,500) Hint *Allocated on the basis of sales dollars. Print 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. References 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. *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 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? Required 1 Required 2 > Financial (disadvantage) per quarter Financial advantage per quarter 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 0 0 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses 0 0 0 0 0 0 $ Product line segment margin (loss) $ $ 0 Net operating income (loss) $ 0
