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The Regal Cycle Company manufactures three types of bicycles-a dirt bike, 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, mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow. Dirt Bikes $ 266,000 Mountain Bikes $ 406,000 Racing Bikes $ 253,000 111,000 197,000 158,000 459,000 155,000 209,000 95,000 69,100 8,300 40,100 20,700 44,100 20,300 8,000 15,800 115,600 40,400 38,400 36,800 185,000 53,200 81,200 50,600 413,800 122,200 167,700 123,900 $ 45,200 $ 32,800 $ 41,300 $ (28,900) 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) Total $925,000 466,000 "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: 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 21 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 Required 3 Required 2 Should the production and racing bikes be discontinued? Should the production and sale of racing bikes be discontinued? Downed ? Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-ru profitability of the various product lines. Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals Dirt Bikes Mountain Bikes Racing Bikes
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