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Check The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses
Check 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 Dirt Bikes Sales Variable manufacturing and selling expenses $920,000 472,000 $ 266,000 Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 448,000 114,000. 152,000 Mountain Bikes $ 401,000 205,000 196,000 68,800 8,400 40,200 Racing Bikes $ 253,000 153,000 100,000 20,200 43,800 21,000 7,700 115,200 40,100 39,000 15, 100 36,100 184,000 53,200 80,200 411,800 122,700 167,100 50,600 122,000 Net operating income (loss) "Allocated on the basis of sales dollars. $ 36,200 $ 29,300 $ 28,900 $ (22,000) 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 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? Financial advantage (disadvantage) per quarter $ (400) "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recomm the line should be discontinued. The special equipment used to produce racing bikes has no resale vall 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 manageme profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes No < Required 1 Required 3 > 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 lor profitability of the various product lines. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0 < Required 2 Required 3
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