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Could you explain the calculations also, please. Exercise 12-2 Dropping or Retaining a Segment [LO12-2] The Regal Cycle Company manufactures three types of bicycles-a dirt
Could you explain the calculations also, please.
Exercise 12-2 Dropping or Retaining a Segment [LO12-2] 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 Bikes Mountain Racing Bikes Total Bikes 920,000 $263,000 407,000 250,000 Sales Variable manufacturing and selling 470,000 118,000 198,000 154,000 expenses Contribution margin Fixed expenses: 450,000 145,000 209,000 40,800 39,000 96,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 8,700 43,800 20, 600 115,400 40,200 52,600 413,100 122,100 69,900 20,400 15,700 36,200 50,000 168,700122,300 7,500 184,000 81,400 Total fixed expenses Net operating income (loss) $ 36,900 22,900 40,300 (26,300) 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 1Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required Required 2> Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required3 Prepare a properly formatted seqmented 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 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) 0 Net operating income (loss) K Required 2 Required 3Step by Step Solution
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