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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

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:
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.The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: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.*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.
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.
Total Dirt Bikes Mountain Bikes Racing Bikes
Sales $ 926,000 $ 262,000 $ 407,000 $ 257,000
Variable manufacturing and selling expenses 463,000112,000194,000157,000
Contribution margin 463,000150,000213,000100,000
Fixed expenses:
Advertising, traceable 69,3008,30040,30020,700
Depreciation of special equipment 44,20020,4007,90015,900
Salaries of product-line managers 114,40040,30038,60035,500
Allocated common fixed expenses*185,20052,40081,40051,400
Total fixed expenses 413,100121,400168,200123,500
Net operating income (loss) $ 49,900 $ 28,600 $ 44,800 $ (23,500)
*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.
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