Exercise 11-2 Dropping or Retaining a Segment [LO11-2) The Regal Cycle Company manufactures three types of bicycles- dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow. Total S921.88 476,000 445,880 Dirt Bikes 264,800 113,000 151, 880 Mountain Bikes 402.000 204.000 198,000 Racing Bikes $255.000 159,00 96. 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 Niet operating income (loss) 69,900 43, See 116.809 154,200 413,600 31,400 8,700 20,50 40,700 $2,500 122,780 $ 28,300 40,00 20,500 7,400 15,600 38,600 36,700 80,400 51.000 167 180 123.00 39,900 $(27,800) $ $ "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 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Financial (disadvantage) per quarter Red 1 Required 2 > Exercise 11-2 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. Dirt Mountain Racing TotalBikes Bikes Bikes $ 921,000 $264,888 $ 422,880 $ 255,000 476,880 113,080 284,288 159,000 445,000 151,8301198,888 96.899 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) 69,900 43,500 116,90 184,280 413.609 40.700 7.400 38,500 8,780 20,500 40,790 52,500 122,700 $28.380 20,500 15,600 36,789 51,800 123,880 (27,880) 167, 189 39.900 $ 31.400 $ *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 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? NO 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 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 Contribution margin (loss) Traceable forced expenses Total traceable fored expenses Product line segment margin (loss) Net operating income (loss) 0 (Required 2
