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 $ 929,000 455,000 474,000 Dirt Bikes $ 263,000 110,000 153,000 Mountain Bikes $ 409,000 190,000 219,000 Racing Bikes $ 257,000 155,000 102,000 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) 70,500 43,800 114,400 185,800 414,500 $ 59,500 8,800 20,600 40, 100 52,600 122,100 $ 30,900 41,000 7,400 38,500 81,800 168, 700 $ 50, 300 20,700 15,800 35,800 51,400 123, 700 $ (21,700) *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. 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? 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 O No 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) 0 0 0 0 Traceable fixed expenses: Total traceable fixed expenses 0 0 0 0 Product line segment margin (loss) 0 $ 0 $ 0 $ 0 Net operating income (loss) $ 0 Kristen Lu purchased a used automobile for $18,950 at the beginning of last year and incurred the following operating costs: Depreciation ($18,950 = 5 years) Insurance Garage rent Automobile tax and license Variable operating cost $ 3,790 $ 1,900 $ 1,000 $ 510 $ 0.08 per mile The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $3,790. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 24,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Answer is complete but not entirely correct. $ 0.48 Average fixed cost per mile Variable operating cost per mile Average cost per mile $ 0.08 $ 0.56
