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 $919,000 $262.000 S 402,000 $ 255,000 465.000 115,000 199,000 151,000 454,000 147,000 203.000 104.000 Sales Variable manufacturing and selling expeses Contribution margin Tixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Bet operating Incone (los) 68.900 8.200 40,000 20,400 43,500 20,300 7,900 25,400 115,400 40, 700 39.000 35,700 183,800 52,400 30.400 51.000 411,700 121,600 167,600 122.500 $ 42,300 $ 25.400 $ 35,400 $(10.500) *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 Complete this question by entering your answers in the tabs below. Required 1 Required Required 2 --- Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (los) 115,400 40,700 39,000 35,700 183,800 52,400 80,400 51,000 411,700 121,600 167,600 122,500 $ 42,300 $ 25,400 $ 35, 400 $(18,500) "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. 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 2 > 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)
