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 $ 930,000 $263,000 $410,000 $ 257,000 467,eee 115, eee 198, ece 154, eee 463, eee 148,000 212, eee 103,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product line managers Allocated conmon fixed expenses Total fixed expenses Net operating income (loss) 69,500 8,900 40, 4ee 20,280 43,800 20,400 7,700 15,700 114,400 40,200 38,500 35,780 186,000 52,600 82,000 51,400 413,700 122, 100 168,600 123,000 $ 49,300 $ 25,900 $ 43,400 $(20,000) "Allocated on the basis of sales dollars. nces 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 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 $ 930,000 $263,000 $ 410,000 $ 257,000 467,000 115,eee 198,000 154,000 463,000 148,000 212,000 103,eee 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 incone (loss) 69,500 8,990 40,400 20,200 43,800 2e,400 7,780 15,700 114,400 40,200 38,500 35,700 186,000 52,600 82,000 51,400 413,700 122,100 168,600 123,eee $ 49,300 $ 25,900 $ 43,400 $(20,eee) "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 properly 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 Bikes Racing Bikes Contribution margin (loss) Traceable fored expenses Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
