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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 Total Dirt Bikes Sales Bikes $ 929,000 Racing Dikes Variable manufacturing and selling expenses $ 262,000 $ 410,000 $ 257.000 480,000 114,000 210,000 156,000 Contribution margin 449,000 148.000 Fixed expenses: 200,000 101,000 Advertising, traceable 68,500 8,300 40,100 20,100 Depreciation of special equipment 43,700 20,400 7,500 15,800 Salaries of product-line managers 115,800 40, 800 38,500 36,500 Allocated common fixed expenses 185,800 52,400 82,000 52.400 Total fixed expenses 413,800 121,900 168, 100 123 800 Net operating income (los) $ 35,200 $ 26, 100 $ 31,900 $ 22,00) "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? m 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. 5 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? 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? Financial (disadvantage) per quarter Required 1 Required 2 > Required 1 Required 2 Required 3 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. Totals Dirt Bikes Mountain Bike Racing Bikes 0 0 Sales Variable manufacturing and selling expenses Contribution margin (los) Traceable forced expenses Advertising, traceable Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (los) Common fixed expenses Not operating income (1) 0 0 0 0 0 $ 0 $ 0 $ 0
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