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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 Racing Bikes Total Dirt Bikes Bikes Sales $ 931,000 $ 267,000 $ 408,000 $ 256,000 Variable manufacturing and selling expenses 472,000 119,000 194,000 159,000 Contribution margin 459,000 148,000 214.000 97,000 Fixed expenses Advertising, traceable 70,300 8,500 40,900 20,900 Depreciation of special equipment 43,700 20,300 8,000 15,400 Salaries of product-line managers 114,800 40,000 38,300 36,500 Allocated common fixed expenses 186,200 53,400 81.600 51,200 Total fixed expenses 415,000 122, 200 168.800 124,000 Net operating income (100) $ 44,000 $ 25,000 $5,200 5.(27.000) "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. 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? Financial advantage (disadvantage) per quarter (Required Required 2 > os 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 0 0 0 0 Contribution margin (los) Traceable fixed expenses 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 $ 0 $ 0 $ 0 $ 0 Not operating income (los)
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