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 Bikes Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 300,000 90,000 150,000 S 60,000 120,000 27,00060,000 33,000 180,000 63,000 90,000 14,000 13,000 66,000 Advertising, traceable 30,000 10,000 6,000 35,000 12,00e 18,000 148,000 46,000 6,000 8,000 10,000 12,000 36,000 Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 23,000 60,000 $ 32,000 9,000 30,0001200 Total fixed expenses Net operating income (loss) 17,000 $ 24,000 (9,000) 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 2Required 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 fixed expenses Total traceable fixed expenses Product line segment margin (loss)
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