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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: Mountain Total Dirt Bikes Bikes Racing Bikes Sales $.922,000 $ 266,00 $ 401,000 Variable manufacturing and selling expenses $ 255,000 471,000 114,000 205,000 152,000 Contribution margin 451,000 152.000 196,000 103,000 Fixed expensest Advertising, traceable 69,700 8,500 40,900 Depreciation of special equipment 20,300 44,400 20,800 7.800 15,800 Salaries of product-line sanagers 114,300 40,100 38,200 36,000 Allocated common fixed expenses 184, cee 53,200 80.200 $1.000 Total fixed expenses 412. Bee 122.600 167.100 123, 180 Net operating income (loss) $ 38,200 $ 29,400 $ 28,900 $ (2010) "Allocated on the basis of soles 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? Red 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 long run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required Should the production and sale of racing bikes be discontinued? Yos No
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