Question
Sales Variable manufacturing and selling expenses Contribution margin Pixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses
Sales Variable manufacturing and selling expenses Contribution margin Pixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) "Allocated on the basis of sales dollars. Total $ 934,000 455,000 Dirt Bikes $ 267,000 Mountain Bikes $409,000 193,000 Racing Bikes $ 258,000 151,000 479,000 111,000 156,000 216,000 107,000 68,800 8,100 40,600 20,100 44,000 20,800 7,800 15,400 116,200 40,900 38,600 36,700 186,800 53,400 81,800 51,600 415,800 123,200 168,800 123,800 $ 63,200 $ 32,800 $ 47,200 $ (16,800) 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 11 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? C
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