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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
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 $ 927,000 475,000 452,000 Dirt Bikes $ 267,000 116,000 151,000 Mountain Bikes $ 401,000 207,000 194,000 Racing Bikes $ 259,000 152,000 107,000 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 43,500 113,900 185,400 412,100 $ 39,900 8,300 20,600 40,100 53,400 122,400 $ 28,600 40, 700 7,600 38,500 80,200 167,000 $ 27,000 20, 300 15,300 35,300 51,800 122,700 $ (15,700) *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. 452,000 151,000 194,000 107,000 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 43,500 113,900 185,400 412,100 $ 39,900 8,300 20,600 40,100 53,400 122,400 $ 28,600 40,700 7,600 38,500 80,200 167,000 $ 27,000 20, 300 15,300 35, 300 51,800 122,700 $ (15,700) 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 he 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 advantage (disadvantage) per quarter WOI 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 927,000 475,000 452,000 Dirt Bikes Mountain Bikes Racing Bikes $ 267,000 $ 401,000 $ 259,000 116,000 207,000 152,000 151,000 194,000 107,000 69,300 40,700 20,300 Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (loss) Common fixed expenses Net operating income (loss) 43,500 8,300 20,600 40,100 69,000 7,600 38,500 86,800 15,300 35,300 113,900 226,700 70,900 36,100 225,300 $ 82,000 $ 107,200 $ $ 225,300
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