Managerial accounting 8th edition 11-2 questions 1-3

42 Chapter 11 EXERCISE 11-2 Dropping or Retaining a Segment LO11-2 The Regal Cycle Company manufactures three types of bicycles-a dint ing bike. Data on sales and expenses for the past quarter follow Mountain Racing Dirt Bikes Bikes Sales Variable manufacturing and selling expenses... Contribution margin Fixed expenses $300,000 $90,000 $150,000 $60,000 120,0002700060,00033,000 90,000 27,000 180,000 63,000 14,000 6,000 9,000 8,000 35,000 12,00013,000 10,000 60,000 18,000 30,000 12,000 148,000 46,000 66,000 36,000 30,000 10,000 Salaries of product-line managers Allocated common fixed expenses'.... Total fixed expenses.... Net operating income (loss). $ 32000 $17000 $ 24.000 $ (9,000 Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a tion 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. perly formatted segmented income statement that would be more useful to management Prepare a pro in assessing the long-run profitability of the various product lines EXERCISE 11-3 Make or Buy Decision LO11-3 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 sup- plier has offered to sell one type of carburetor to Troy Engines. Ltd., for a cost of $35 nr unit To