2 nts eBook Hint Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] 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: 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 ferences Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 923,000 472,000 451,000 Dirt Bikes $ 269,000 112,000 157,000 Mountain Bikes $ 401,000 202,000 Racing Bikes $ 253,000 158,000 199,000 95,000 69,000 8,200 40,500 20,300 43,700 20,700 7,400 15,600 114,900 40,400 38,200 36,300 184,600 53,800 80,200 50,600 412,200 123,100 166,300 122,800 $ 38,800 $ 33,900 $ 32,700 $ (27,800) 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?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2]
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:
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
ferences
Net operating income (loss)
*Allocated on the basis of sales dollars.
Total
$ 923,000
472,000
451,000
Dirt Bikes
$ 269,000
112,000
157,000
Mountain
Bikes
$ 401,000
202,000
Racing Bikes
$ 253,000
158,000
199,000
95,000
69,000
8,200
40,500
20,300
43,700
20,700
7,400
15,600
114,900
40,400
38,200
36,300
184,600
53,800
80,200
50,600
412,200
123,100
166,300
122,800
$ 38,800
$ 33,900
$ 32,700
$ (27,800)
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?
Transcribed Image Text:2 nts eBook Hint Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] 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: 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 ferences Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 923,000 472,000 451,000 Dirt Bikes $ 269,000 112,000 157,000 Mountain Bikes $ 401,000 202,000 Racing Bikes $ 253,000 158,000 199,000 95,000 69,000 8,200 40,500 20,300 43,700 20,700 7,400 15,600 114,900 40,400 38,200 36,300 184,600 53,800 80,200 50,600 412,200 123,100 166,300 122,800 $ 38,800 $ 33,900 $ 32,700 $ (27,800) 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?
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