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The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the
The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: TotalDirt BikesMountain BikesRacing BikesSales$ $ $ $ Variable manufacturing and selling expensesContribution marginFixed expenses: Advertising, traceableDepreciation of special equipmentSalaries of productline managersAllocated common fixed expensesTotal fixed expensesNet operating income loss$ $ $ $ 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: What is the financial advantage disadvantage per quarter of discontinuing the Racing Bikes? Should the production and sale of racing bikes be discontinued? Prepare a properly formatted segmented income statement that would be more useful to management in assessing the longrun profitability of the various product lines.What is the financial advantage disadvantage per quarter of discontinuing the Racing Bikes?
The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: TotalDirt BikesMountain BikesRacing BikesSales$ $ $ $ Variable manufacturing and selling expensesContribution marginFixed expenses: Advertising, traceableDepreciation of special equipmentSalaries of productline managersAllocated common fixed expensesTotal fixed expensesNet operating income loss$ $ $ $ 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: What is the financial advantage disadvantage per quarter of discontinuing the Racing Bikes? Should the production and sale of racing bikes be discontinued? Prepare a properly formatted segmented income statement that would be more useful to management in assessing the longrun profitability of the various product lines.What is the financial advantage disadvantage per quarter of discontinuing the Racing Bikes?
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