The Regal Cycle Company manufactures three types of blcycles- dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: F.600 122,400 Mountain Total Dirt Bikes Bikes Racing Bikes Sales $927,000 $ 262,000 $ 406,000 $ 259,000 Variable manufacturing and selling expenses 470,000 111.000 202,000 157,000 Contribution margin 457,000 151,000 204,000 102,000 Fixed expenses Advertising, traceable 69, 700 8,400 40,700 Depreciation of special equipment 44,200 20,300 7,600 15,800 Salaries of product-line managers 114,600 40.800 38,600 35,200 Allocated common fixed expenses 185,400 52,400 81.200 51.800 Total fixed expenses 412,900 168.100 123,400 Net operating income (2008) $ 43,100 $ 28,600 $ 35,900 $ (21,400) "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 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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 $ 927,000 470,000 457.000 Dirt Bikes $ 262,000 111,000 151.000 Mountain Bikes $ 406,000 202,000 204,000 Racing Bikes $ 259,000 157.000 102,000 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 (los) 69,700 44,200 114,600 185,400 413,900 $ 43,100 8.400 20,800 40.800 52,400 122,400 $28,600 40,700 7.600 38,600 81.200 168,100 $35.900 20,600 15,800 35,200 51.800 123, 400 $ 121,400) "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 Bike Racing Bes Contribution margin (loss) Traceable faced expenses: 0 0 o 0 Total traceable foxed expenses Product line segment margin (los) 0 0 0 os os 05 Net operating income (los) $
