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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 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: Mountain Bikes Total $ 929,000 Sales $ 404,000 201,000 Racing Bikes $ 257,000 155,000 Dirt Bikes $ 268,000 115,000 153,000 Variable manufacturing and selling expenses Contribution margini Fixed expenses: 471,000 458,000 203,000 102,000 Advertising, traceable. 69,200 8,100 40,100 21,000 43,900 20,700 8,000 15,200 Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses. Total fixed expenses 114,800 40,700 38,700 35,400 185,800 53,600 80,800 51,400 413,700 123,100 167,600 123,000 Net operating income (loss) $44,300 $ 29,900 $ 35,400 $ (21,000) "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. 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 $ (21,000) Required 2 >
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