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 Total $ 920,000 457,000 463,000 Dirt Bikes $265,000 111,000 154,000 Mountain Racing Bikes Bikes $ 402,000 $ 253, eee 193,000 153,080 209,00 100,000 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) 69,300 44,180 115,900 184,000 413,300 $ 49,700 8,300 40,200 20,880 20,980 7,400 15,880 40,600 38,400 36,900 53,080 80,400 50,680 122,880 166,400 124,180 $ 31,200 $ 42,600 $ (24,100) "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 The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales an expenses for the past quarter follow: Total $ 920,000 457,080 463,000 Dirt Bikes $265,000 111,000 154,880 Mountain Racing Bikes Bikes $ 402,000 $ 253,000 193,000 153,000 209,000 180,000 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) 69.3908 .389 44,180 20,980 115,900 40,600 184,000 53,000 413,300 122,880 49,780 $ 31,200 40.200 7,400 38,400 80,400 166,400 42,600 20,800 15,800 36,900 50.600 124,180 $ (24,100) $ $ *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 om 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-r profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required i 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 Sales Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (loss) 0001 OS 0 $ 0 $ Net operating income (loss)
