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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 $ 923.000 476,000 447,000 Dirt Bikes $262.000 112,000 150,000 Mountain Bikes $106.000 205,000 201.000 Racing Bikes $ 255,000 159,000 96, ODD 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 incone (loss) 70, 300 44,000 116,400 184, 600 415, 300 31, 700 8,800 40,600 20, 500 7,800 40, 600 39,800 52,400 81,200 122.300 168.400 $ 27, 700 Search 2, 600 20,900 15, 700 37,000 51.000 124, 600 $ (28,600) $ CHE *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 Search What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter Required 1 Required 2 > Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes O No es Search Required 1 Required 3 > CHE 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: Search CHE Total traceable fixed expenses Product line segment margin (loss) 0S 0S 0S 0 Net operating income (loss)
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