The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a...
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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 past quarter follow: 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) *Allocated on the basis of sales dollars. Total $ 915,000 472,000 443,000 Dirt Bikes $ 262,000 118,000 144,000 Mountain Bikes $ 402,000 202,000 Racing Bikes $ 251,000 152,000 200,000 99,000 68,300 8,100 40,100 20,100 43,000 20,100 7,500 15,400 115,900 40,800 38,400 36,700 183,000 52,400 80,400 50,200 410,200 121,400 166,400 122,400 $ 32,800 $ 22,600 $ 33,600 $ (23,400) 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. Answer is not complete. 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 $ 38,000 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: 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) *Allocated on the basis of sales dollars. Total $ 915,000 472,000 443,000 Dirt Bikes $ 262,000 118,000 144,000 Mountain Bikes $ 402,000 202,000 Racing Bikes $ 251,000 152,000 200,000 99,000 68,300 8,100 40,100 20,100 43,000 20,100 7,500 15,400 115,900 40,800 38,400 36,700 183,000 52,400 80,400 50,200 410,200 121,400 166,400 122,400 $ 32,800 $ 22,600 $ 33,600 $ (23,400) 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. Answer is not complete. 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 $ 38,000
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