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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: 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) Dirt Mountain Racing Total Bikes Bikes Bikes $925,000 $264,000 $405,000 $ 256,000 460,000 113,000 197,000 150,000 465,000 151,000 208,000 106,000 69,600 8,200 40,600 20,800 43,200 20,400 7,200 15,600 114,400 40,500 38,500 35,400 185,000 52,800 81,000 51,200 412,200 121,900 167,300 123,000 $ 52,800 $ 29,100 $ 40,700 S (17,000) *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 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 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required Required 2 > 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 $925,000 $264,000 $405,000 $ 256,000 460,000 113,000 197,000 150,000 465,000 151,000 208,000 106,000 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) 69,600 8,200 40,600 20,800 43,200 20,400 7,200 15,600 114,400 40,500 38,500 35,400 185,000 52,800 81,000 51,200 412,200 121,900 167,300 123,000 $ 52,800 $ 29,100 $ 40,700 $ (17,000) "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 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes ONO Dirt Mountain Racing Total Bikes Bikes Bikes $925,000 $264,000 $405,000 $ 256,000 460,000 113,000 197,000 150,000 465,000 151.000 200.000 106,000 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 (los) 69,600 8.200 40,600 20,800 43,200 20.400 7.200 15,600 114,400 40,500 38,500 35.400 185,000 81,000 51,200 412.200 121.900 167.00 120.000 $ 52,800 $ 29,100 $ 40,700 $(17.000) "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 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. Total Dirt Bikes Mountain Bike Racing Bikes 0 0 0 Contribution margin (loss) Tracf ed expenses 0 0 0 Total traceable faxed expenses Product line segment margin (oss) 05 05 05 0 Net operating income (los)
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