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The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the
The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Mountain Racing Bikes Total Dirt Bikes Bikes Sales 1; 934,993 $ 268,666 $ 437,399 is 259,666 Variable manufacturing and selling expenses 464,666 119,666 193,666 152,666 Contribution margin 476,666 149,666 214,666 167,666 Fixed expenses: Advertising, traceable 69,766 8,366 46,666 26,866 Depreciation of special equipment 43,266 26,366 7,866 15,166 Salaries of productsline managers 114,966 46,366 38,366 36,366 Allocated common 'Fixed expenses' 186,866 53,666 81,466 51,866 Total fixed expenses 414,666 122,566 168,166 124,666 Net operating income (loss) 15 55,466 $ 26,566 $ 45,966 5 (17,666) '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 longrun protability ofthe various product lines. 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 longrun protability ofthe 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? Required 2 ) 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 longrun protability of the various product lines. Compiete this quation by entering your answers in the tabs below. Required 1 Required 2 ' Required 3 ( Required1 Required3 ) 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 Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
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