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: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $ 922,000 $ 262,000 $ 408,000 $ 252,000 Variable manufacturing and selling expenses 479,000 118,000 203,000 158,000 Contribution margin 443,000 144,000 205,000 94,000 Fixed expenses: Advertising, traceable 70,100 8,700 40,600 20,800 Depreciation of special equipment 43,800 20,800 7,700 15,300 Salaries of product-line managers 114,800 40,300 39,000 35,500 Allocated common fixed expenses* 184,400 52,400 81,600 50,400 Total fixed expenses 413,100 122,200 168,900 122,000 Net operating income (loss) $ 29,900 $ 21,800 $ 36,100 $ (28,000)

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.

Check my work 1 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: 10 points Dirt Mountain Racing Total Bikes Bikes Bikes $ 922,000 $262,800 $ 488,800 $ 252,800 479, eee 118,eee 2e3,000 158,00 443,800 144,000 285.ege 94,888 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) 70,100 8,700 40,600 29,800 43,800 20,800 7.700 15,300 114,800 40,300 39, eae 35,500 184,400 52,400 81,600 50,400 413,100 122,298 168,900 122, eee $ 29,900 $ 21,800 $ 36,109 36,100 $(28,eee) 00 Hint *Allocated on the basis of sales dollars. Print 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. References 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? Check my work 1 *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. 10 points 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. eBook Complete this question by entering your answers in the tabs below. Hint Required 1 Required 2 Required 3 Print 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. References Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Net operating income (loss)