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 $932,000 $269,000 $ 408,000 $ 255,000 474,000 111,000 203,000 160,000 458,000 158,000 205,000 95,000 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 (loos) 70,800 9,000 43,300 20,200 115,000 40,500 186, 400 53,800 415,500 123,500 $ 42,500 $ 34,500 40,900 10.000 20.900 7,500 15,600 38,700 35,800 81,600 51,000 168,700 123,300 $ 36,300 $(28,300) "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? Financial (disadvantage) per quarter Dirt Mountain Racing Total Bikes Bikes Bikes $932,000 $269,000 $ 408,000 $ 255,000 474,000 111,000 203,000 160,000 458,000 158,000 205,000 95,000 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) 70,800 9,000 43,300 20,200 115,000 40,500 186,400 53,800 415,500 123,500 $ 42,500 $ 34,500 40,900 7,500 38,700 81,600 168,700 $ 36,300 20,900 15,600 35,800 51,000 123,300 $(28,300) "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 wheth the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear 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 lon profitability of the various product lines. 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? ONO Saved amework o wyc i sco uuvusi UIRTUCUJJCSU CIULUIRE UN ULURUUUU the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not 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 th 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: + Total traceable foxed expenses Product line segment margin (loss) Net operating income (loss) ( Required 2
