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 $926,000 $261,800 $407,000 $ 258,000 Variable manufacturing and selling 465,000 117,000 196,000 expenses 152,000 Contribution margin 461,000 144,000 211,000 106,000 Fixed expenses: Advertising, traceable 69, 700 8,300 40,400 21,000 Depreciation of special equipment 43,000 20,600 7,200 15,200 Salaries of product-line managers 115,700 41,000 38,700 36,000 Allocated common fixed expenses 185,200 52,200 81,400 51,600 Total fixed expenses 413,600 122, 100 167,700 123,800 Net operating income (loss) $ 47, 400 $ 21,900 $ 43,300 $(17,800) "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? Dan G Mart Question 2 - 40 Saved UU UP 2 PEU my Allocated common fixed expenses* Total fixed expenses Net operating income (loss) 185,200 52,200 81,400 51,600 413,600 122, 100 167, 700 123,800 $ 47, 480 $ 21,900 $ 43,300 $(17,808) 3 8:05 "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 o the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear ou 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- 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? OYes ONO 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 52 Prepare a property 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)
