used to produce ing replacing its materials with the new machine have no effect on production or sales, other than sol less waste 2 computations. Suppose that if ity to launch a year. Should T all computatic EXERCISE 12-2 Dropping or Retaining a Segment (LO12-21 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: Racing Dirt Bikes Mountain Bikes Bikes Total EXERCISE 12-4 E Imperial Jewelers gifts to members unit product cost $150,000 $90,000 $60,000 $300,000 Sales 120.000 27,000 63,000 60,000 90,000 33,000 27,000 180.000 14,000 10,000 30,000 6,000 23,000 6,000 9,000 8,000 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)...... 35,000 12.000 13,000 10.000 60,000 30,000 12.000 18,000 46,000 66.000 148,000 $ 32,000 36,000 $(9.000 $17,000 $ 24,000 Most of the ti is produced i number of br like special 1 ing $2.00 pe have no oth pany's regul affecting an Required: What effec price of $1 price? "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a rec- ommendation 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. Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer. 2. Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines. EXERCISE Outdoor three of EXERCISE 12-3 Make or Buy a Component 101721