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 $934,000 $268,000 $ 409,000 $ 257,000 473,000 119,000 200,000 154,000 461,000 149,000 209,000 103,000 Sales Variable manufacturing and selling expenses Contribution margin Tixed expenses Advertising, traceablo Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses. Total fixed expenses Het operating income (10) 69,600 8,500 40,800 20,300 43,600 20,400 2,700 15,500 114,800 40, 700 38,700 35,400 186,800 53,600 81,800 51,400 414,800 123,200 169,000 122.600 $ 46,200 $ 25,800 $ 40,000 $(19.600) *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. Prey 1 of 6 !!! Next > *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommend the line should be discontinued. The special equipment used to produce racing bikes has no resale value 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 i 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 > on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wan the line should be discontinued. The special equipment used to produce racing bikes has Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing BI 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 profitability of the various product lines. s Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes No 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 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
