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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 Dirt Mountain Racing Total Bikes Bikes Bikes $926,000 $269,000 $ 404,000 $ 253,000 476,000 114,000 209,000 153,000 450,000 155,000 195,000 100,000 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 (loss) 70,400 9.000 40,900 20,500 44,500 20,500 8,000 16,000 114,700 40,400 38,200 36,100 185,200 53,800 30.800 50,680 414,800 123,700 167 900 123,200 $ 35,200 $ 31,300 $ 27,100 $(23,200) 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? 2. Prepare a property 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: Tequired 2 Required What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes Required 2 > 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 Contribution margin (105) Traceable foed expenses 0 0 0 0 Total traceable fixed expenses Product line segment margin (los) 0 0 0 0 0 $ 0 $ 0 $ 0 Net operating income foss) $ 0
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