Question
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
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)
Total
$ 928,000
465.000
463.000
Dirt Bikes
$ 268,000
113,000
155,000
Mountain
Bikes
$ 406,000
194.000
212,000
Racing Bikes
$ 254,000
158,000
96,000
70,200
43,700
115,600
185.600
415,100
$ 47,900
8,500
20,100
40,200
53,600
122.400
$ 32,600
40,900
7,800
39,000
81,200
168,900
$ 43,100
20,800
15,800
36,400
50,800
123,800
$ (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:
- What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
- Should the production and sale of racing bikes be discontinued?
- 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
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: "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. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Complete this question by entering your answers in the tabs below. 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
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)
Total
$ 928,000
465.000
463.000
Dirt Bikes
$ 268,000
113,000
155,000
Mountain
Bikes
$ 406,000
194.000
212,000
Racing Bikes
$ 254,000
158,000
96,000
70,200
43,700
115,600
185.600
415,100
$ 47,900
8,500
20,100
40,200
53,600
122.400
$ 32,600
40,900
7,800
39,000
81,200
168,900
$ 43,100
20,800
15,800
36,400
50,800
123,800
$ (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:
- What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
- Should the production and sale of racing bikes be discontinued?
- 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
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