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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: Dirt Mountain Racing Bikes Bikes Total 926,000 $267,000 $ 406,000 253,000 479,000 114,000 208,000 157,000 Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 447,000153,000198,000 69,100 20,100 15,900 37,000 50,600 123,600 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 40,600 7,600 38,800 81,200 415,000 123,200 168, 200 8,400 44,000 20,500 116,700 40,900 185,200 53,400 Total fixed expenses Net operating income (loss) $ 32,000 29,800 $ 29,800 (27,600) 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. 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: .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. Answer is complete but not entirely correct. 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 $ 129,600
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