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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: Total $ 928,000 469,00 459,000 Dirt Bikes $ 261,880 112,080 149,000 Mountain Bikes $ 499,00 200,00 209,000 Racing Bikes $ 258,000 157,000 101,00 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) 69,789 43,500 114,820 185,600 413,689 $ 45,488 8,888 28,280 48, 380 52,200 121,500 $ 27,500 40, 800 7,908 38,900 81,808 169, 409 $ 39,600 20,100 15,400 35,600 51,600 122,700 $ (21,780) *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? 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 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 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses 0 0 0 0 Product line segment margin (loss) 0 $ 0 S 0 S 0 Net operating income (loss) S 0
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