Question #1

Question #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 $ 924,000 460,000 464,000 Dirt Bikes $ 267,000 116,000 151,000 Mountain Bikes $ 401,000 193,000 208,000 Racing Bikes $ 256,000 151,000 105,000 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) 69,600 43,300 116,500 184,800 414,200 $ 49,800 8,800 20,800 40,900 53,400 123,900 $ 27,100 40,200 7,400 38.900 80,200 166, 700 $ 41,300 20,600 15,100 36,700 51,200 123,600 $ (18,600) *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? 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) 0 0 0 0 Traceable fixed expenses Total traceable fixed expenses 0 0 0 0 Product line segment margin (loss) 0 $ 0 $ 0 $ 0 Net operating income (loss) $ 0