Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] 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: Total $ 929,000 468,000 461,000 Dirt Bikes $ 267,000 112,000 155,000 Mountain Bikes $ 406,000 203,000 203,000 Racing Bikes $ 256,000 153,000 103,000 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) 70,100 44,000 114,900 185,800 414,800 $ 46,200 8,800 20,500 40,400 53.400 123, 100 $ 31,900 40, 800 7,800 39,000 B1,200 168,800 $ 34,200 20,500 15,700 35,500 51,200 122,900 $ (19,900 "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 continuing 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 Denne format enementen inamaanisha maent Smart in een the lanRRIR Prey 1 of 8 !!! Next > Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses. Total fixed expenses Net operating income (loss) 70,100 44,000 114,900 185,800 414,800 $ 46,200 8,800 20,500 40,400 53.400 123, 100 $ 31,900 40,800 7,800 39,000 81,200 168,000 $ 34,200 20,500 15,700 35,500 51,200 122,900 $. (19,9001 "Allocated on the basis of sales dollars. Book Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear 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 lor profitability of the various product lines. int rences Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advarse (disadvantage) per quarter of discontinuing the Racing Bikes? Financial advantage per quarter Required Required 2 > Prey 1 of 8 !!! Next > 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 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 ces 0 0 0 0 Contribution margin (loss) Traceable foxed expenses + 0 0 0 Total traceable foxed expenses Product line segment margin (loss) 0 0 $ 0 $ 0 $ 0 Net operating income (loss) $ 0
