Total Bikes Bikes Bikes Sales Variable manufacturing and selling 931,000 $263,000 408,000 260,000 153,000 107,000 465,000 118,000 194, 000 expenses Contribution margin Fixed expenses: 466, 000 145,000 214, 000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,400 15,600 36,700 52,000 124,700 $ 49,900 22,100 45,500 (17,700) 40,700 7,700 38,500 81,600 416,100 122,900 168,500 69,800 44,300 115,800 186,200 8,700 21,000 40,600 52,600 Total fixed expenses Net operating income (loss) 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? Required 1 Required 2 > Sales 931, 000 263, 000 408,000 $ 260,000 Variable manufacturing and selling 465,000 118,000 194,000 153,000 expenses Contribution margin Fixed expenses: 466,000 145,000 214,000 107,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 40,700 7,700 38,500 81,600 416,100 122,900 168,500 8,700 44,300 21,000 115,800 40,600 52,600 20,400 15,600 36,700 52,000 124,700 49,900 22,100 45,500 $ (17,700) 69,800 186,200 Total fixed expenses Net operating income (loss) 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 Required1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes No Required 1 Required 3 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 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 Net operating income (loss) Required 2 Required 3
