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: Dirt Mountain Racing Total Bikes Bikes Bikes $ 924,000 $262,000 $ 404,000 $ 258,000 471,000 111,000 206,000 154,000 453,000 151.000 198,000 104,000 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 (105) 70,100 8,800 40,800 20,500 44,500 20,800 7,800 15,900 115,900 40,600 38,800 36,500 184,800 52,400 80,800 51,600 415, 300 122,600 168, 200 124,500 $ 37,700 $ 28,400 $ 29,800 $(20,500) "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. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or 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- 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? Required Required 2 > Financial (disadvantage) per quarter Financial advantage per quarter Management is concerned about the continued losses shown by the racing bikes and wants the line should be discontinued. The special equipment used to produce racing bikes has no Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the racing bike- 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 profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes ONO Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful to management in asses run profitability of the various product lines. Totals Dirt Bikes Mountain Bikes Racing Bikes Advertising Common fixed expenses Depreciation of special equipment Salaries of the product line managers Product line segment margin (loss) Net operating income (loss)
