Total Bikes Bikes Bikes $ 924,000 $263,000 $ 408,000 $ 253,000 466,000 117,000 191,000 158,000 458,000 146,000 217,000 9 5,000 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) 69,000 8,100 40,400 20,500 44,200 20,500 7,700 16,000 114,500 40,400 38,200 35,900 184,800 52,600 81,600 5 0,600 412,500 121,600 167,900 123,000 $ 45,500 $ 24,400 $ 49,100 $(28,000) "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. Answer is complete but not entirely correct. 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 $ 97,000 Total Bikes Bikes Bikes $ 924,000 $263,000 $ 408,000 $ 253,000 466,000 117,000 191,000 158,000 458,000 146,000 217,000 9 5,000 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) 69,000 8,100 40,400 20,500 44,200 20,500 7,700 16,000 114,500 40,400 38,200 35,900 184,800 52,600 81,600 5 0,600 412,500 121,600 167,900 123,000 $ 45,500 $ 24,400 $ 49,100 $(28,000) "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. Answer is complete but not entirely correct. 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 $ 97,000
