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:
Sales | 923,000 | 263,000 | 405,000 | 255,000 |
Variable Manufacturing & Selinng Expenses | 477,000 | 112,000 | 206,000 | 159,000 |
Contribution Margin | 446,000 | 151,000 | 199,000 | 96,000 |
Fixed Expenses: | ||||
Advertising, traceable | 69,000 | 8,200 | 40,600 | 20,200 |
Depreciation of special equipment | 42,900 | 20,500 | 7,100 | 15,300 |
Salaries o fproduct-line managers | 115,000 | 40,200 | 39,000 | 35,800 |
Allocated common fixed expenses* | 184,600 | 52,600 | 81,000 | 51,000 |
Total Fixed Expenses | 411,500 | 121,500 | 167,700 | 122,300 |
Net Operating Income (loss) | 34,500 | 29,500 | 31,300 | (26,300) |
*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. Requirement 1: (a) What is the amount of the change in net income if the racing bikes is dropped? (Input the amount as positive value. Omit the "$" sign in your response.) (b) Prepare a segmented income statement
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