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me Reydi Lycie company Ilianuidcluies ee types oi Dicycies-UIIL Dike, a Moun Lalli Dike, diu a lainy DIKE. Vald On Sales diiu expenses for the
me Reydi Lycie company Ilianuidcluies ee types oi Dicycies-UIIL Dike, a Moun Lalli Dike, diu a lainy DIKE. Vald On Sales diiu expenses for the past quarter follow: Dirt Mountain Racing Total Bikes Bikes Bikes $921,000 $263,000 $403,000 $ 255,000 468,000 119,000 197,000 152,000 453,000 144,000 206,000 103,000 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) 69,900 8,600 40,300 21,000 43,000 20,300 7,200 15,500 115,500 40,000 38,600 36,900 184,200 52,600 80,600 51,000 412,600 121,500 166,700 124,400 $ 40,400 $ 22,500 $ 39,300 $(21,400) *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 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 fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
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