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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: Dirt Mountain Racing Total Bikes Bikes Bikes $ 922,000 $262.000 $ 408,000 $ 252,000 468,000 113,000 203,000 152,000 454,000 149,000 205,000 100,000 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) 69,800 8,900 40,400 20,500 43,800 20,400 7,600 15,800 115,800 40,200 38,700 36,900 184,400 52,400 81,600 50,400 413,800 121,900 168,300 123,600 $ 40,200 $ 27,100 $ 36,700 $(23,600) '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. Net operating income (loss) $ 40,200 $ 27,100 $ 36,700 $(23,600) "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 Required 2 > Check my work 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 0 0 0 0 Contribution margin (105) Traceable fixed expenses 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 $ 0 0 $ 0 $ 0 Net operating income (loss) $ 0
