Question
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: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $ 915,000 $ 262,000 $ 403,000 $ 250,000 Variable manufacturing and selling expenses 465,000 116,000 190,000 159,000 Contribution margin 450,000 146,000 213,000 91,000 Fixed expenses: Advertising, traceable 70,100 8,900 40,300 20,900 Depreciation of special equipment 43,800 21,000 7,600 15,200 Salaries of product-line managers 114,400 40,400 38,600 35,400 Allocated common fixed expenses* 183,000 52,400 80,600 50,000 Total fixed expenses 411,300 122,700 167,100 121,500 Net operating income (loss) $ 38,700 $ 23,300 $ 45,900 $ (30,500)
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 Bikes Mountain Racing Total Bikes Bikes Sales Variable manufacturing and selling 915, 000 $262,000 $ 403,000 250,000 465,000 116,000 190,000 159,000 expenses Contribution margin Fixed expenses: 450,000 146,000 213,000 91,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,900 15,200 35,400 50,000 121,500 $ 38,700 23,300 $ 45,900 (30,500) 40,300 7,600 38,600 80,600 411,300 122,700 167,100 8,900 43,800 21, 000 114,400 40,400 183,000 52,400 70,100 Total fixed expenses Net 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: 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-rurn profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2Step by Step Solution
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