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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 5924,000 471,000 453,000 Dirt Bikes $ 266,000 116,000 150,000 Mountain Bikes $ 406,000 203.000 203,000 Racing Bikes $ 252,000 152,800 100,000 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) 70,200 43,300 114,600 184,800 412,900 $ 40,100 9,000 20,700 40,680 53,200 123,500 $ 26,500 40,700 7,500 38.000 21,200 167,400 $ 35,600 20,500 15,100 36,000 50.400 122,000 $ 22,000) 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: Required 2 Required 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
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