Exercise 013-2 1 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: 2 points Skipped Dirt Mountain Racing Total Bikes Bikes Bikes Sales $ 927,eee $264,eee $ 408,00 $ 255,000 Variable manufacturing and selling expenses 469, eee 112, Bee 198,00 159 , e Contribution margin 458, eee 152, see 210,000 96,30 Fixed expenses: Advertising, traceable 69,5ee 9,eee 40,300 29, 200 Depreciation of special equipment 43,600 20,700 7,600 15,300 Salaries of product-line managers 115, 1ee 40,100 38,16 36,990 Allocated common fixed expenses 185,400 52,800 81,600 51,000 Total fixed expenses 413,600 122,600 167,600 123,480 Net operating income (loss) $ 44, 4e0 $ 29,400 42,480 $(27,400) $( eBook 00 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. 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? Exercise 013-3 i 1 Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $30 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 2 points Skipped Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost 12,600 Per Units Unit Per Year $ 12$ 144,000 8 96, ege 2 24,699 9* 108,000 12 144,00 $ 43 $ 516,00 eBook det Hint *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Print Required: 1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 12.000 carburetors from the outside supplier? 2 Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased. Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $120,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 12.000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted? References Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 12,000 carburetors from the outside supplier? Exercise 013-4 i 1 Imperial Jewelers manufactures and sells a gold bracelet for $401.00. The company's accounting system says that the unit product cost for this bracelet is $269.00 as shown below: 2 points Direct materials Direct labor Manufacturing overhead Unit product cost $146 88 35 $269 * Skipped eBook Hint The members of a wedding party have approached Imperial Jewelers about buying 21 of these gold bracelets for the discounted price of $361.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $6. Imperial Jewelers would also have to buy a special tool for $462 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $7.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity. Print References Requlred: 1. What is the financial advantage (disadvantage) of accepting 2. Should the company accept the special order? special order from the wedding party? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party? Required 1 Required 2 >