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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 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated connon fixed expenses Total fixed expenses Net operating income (loss) Dirt Mountain Racing Total Bikes Bikes Bikes 5924,000 $262,000 $ 402,800 $ 260,000 479,000 117,000 209,000 153,000 445,000 145,000 193,800 107,000 69,500 8,400 40,580 20,600 43,600 20,400 7,400 15,880 115,388 40,500 38,300 36,500 184,800 52,400 80,400 52,000 413,200 121,700 166,600 124,900 $ 31,800 $ 23,300 $ 26,400 $(17,900) "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: Required 2 Required What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes
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