Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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: Dirt Mountain Racing Total Bike Bikes Bikes $919,000 $264,000 $404,000 $ 251,000 472,000 111.000 207.000 154,000 447.000 153,000 197,000 97.000 Salen Variable manufacturing and welling 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 (loan) 69.900 9.400 43,000 20,200 115,700 40,500 103,800 52,800 412,400 121 900 $ 34,600 $ 31,100 40.000 20,700 7.400 15,400 38,000 36,400 80,000 50,200 167,800 122.200 29,200 (25,700) "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. Required 1 Required 2 Required 3 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? Financial (disadvantage) per quarter $ 111,750 (Reed Required 2 > 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. 5 Totals Dirt Bikes Mountain Bike Racing Bikes 919.000 $ 264,000 5 404,000 5 251,000 472.000 111,000 207.000 154,000 447,000 153,000 197,000 97000 Sales Variable manufacturing and selling expenses Contribution margin (losa) Traceable fixed expenses Depreciation of special equipment Advertising, traceable Salaries of the product line managers Total traceable foxed expenses Product line segment margin (los) Common fixed expenses Net operating income (los) 43,000 69,900 115,700 228,600 218,400 5 20.200 8.400 40,500 69,100 83,900 $ 7.400 40.800 38,800 87,000 110,000 $ 15400 20,700 36,400 72.500 24,500 218.400
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started