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Dirt Mountain Racing Total Bikes 3 925,000 S 266.000 407.000 S 252.000 473.000 2.000 205.000 5.000 Variable manufacturing and selling expenses Contribution margin 452,000 54,000

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Dirt Mountain Racing Total Bikes 3 925,000 S 266.000 407.000 S 252.000 473.000 2.000 205.000 5.000 Variable manufacturing and selling expenses Contribution margin 452,000 54,000 202.000 6.000 Fixed expenses Advertisina traceable Depreciation of special equipment Salaies of product-line managers Allocated common foxed expenses 70,000 43,900 115,300 8.300 20.900 40.100 85,000 53.200 40.800 7.400 38,900 81.400 20.900 15,800 36,300 50.400 Total fixed expenses 414,200 122.500 108.500 3.200 Nat operating income (loss) $ 37,800 31,500 33,500 S (27,200) Allocated on the basis of sales dollars Management is conoerned about the oontinued 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 1a. What is the impact on net operating income by discontinuing racing bikes?(Decreases should be indicated by a minus sign.) Total If Racing Current Total Bikes Are Operating Income Increase or 925,000 S iable manufacturing and selling expenses Contribution margin (loss) Fxed expenses: 288,000 112.000 154.000 3.000 852.000 Advertising, traceable Depreciation on special equipment Salaries of product managers Common allocated costs 70.000 43.000 115.300 185.000 414.200 437.800S 8.300 20,900 40.100 53.200 22.500 31.500S Total fioxed expenses Net operating income (oss) 1b. Should production and sale of the racing bikes be discontinued? O No 2a. Prepare segmented income statement. Totals Dirt Bikes Mountain Bikes Racing Bikes iable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: Depreciation of special equipment Salaries of the produot line managers Total traceable fixed expenses Product line segment margin foced expenses Net operating income (oss)

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