80.2K

Verified Solution

Link Copied!

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 Total Bikes Bikes Bikes $918,000 $266,000 $401.000 $ 251,000 462,000 115.000 194,000 153,000 456,000 151,000 207,000 98,000 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) 69,900 8,500 40,600 20,800 43,200 20,200 7,900 15,100 114,800 40,100 38,500 36,200 183,600 53,200 80.200 50,200 411, 500 122,000 167,200 122,300 $ 44,500 $ 29,000 $ 39,800 $(24,300) "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. 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? Retired Required 2 > 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. pped Totals Dirt Bikes Mountain Bikes Racing Bikes Book Hint Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (los) Net operating income (loss)

Answer & Explanation Solved by verified expert

See Answer