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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 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 Sales Bikes Bikes 5928,000 $269,000 $ 401,000 $ 258,000 Variable manufacturing and selling expenses 471,000 115,000 Contribution margin 199.000 157,000 457.000 154.000 202.000 101.000 Fixed expenses Advertising. traceable 69,200 3,400 40,100 20,700 Depreciation of special equipment 44,100 20,500 7.800 15,800 Salaries of product-line managers 116,200 40,700 38,900 36.600 Allocated common fixed expenses 185,600 53,000 30,200 51.600 Total fixed expenses 415, 100 123,400 167.000 124,700 Net operating income (los) 5 41,900 5.30,6005 35,000 $(23,700) "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: Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Financial (disadvantago) per quarter Required 2 > 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 Sales 5928,000 $269,000 5 401,000 5 258,000 Variable manufacturing and selling expenses 471,000 115.000 199,000 157,00 Contribution margin 452,200 154,000 202.ee 101.000 Fixed expenses: Advertising, traceable 69.200 8,400 40,100 20,700 Depreciation of special equipment 44,100 28,500 7,800 15,800 Salaries of product line managers 116,200 40.700 36,900 36,500 Allocated conton fixed expenses 185,600 53,800 88,200 51,500 Total fixed expenses 415 100 123,400 167,000 124,700 Net operating income (loss) $ 41,900 $ 30,6005 35,000 $(23,700) "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 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 0 0 os 0 ols 05 0 $ Total traceable fixed expenses Product line segment margin (loss) $ 0 Net operating income (loss)
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