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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: Total $ 923,000 483,000 440,000 69,300 43,300 114,400 Required 1. Required 2 Required 3 Dirt Bikes. $ 264,000 119,000 145,000 184,600 411,600 $ 28,400 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 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. 8,500 20,200 40,500 52,800 122,000 $ 23,000 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 403,000 204,000 199,000 Racing Bikes $ 256,000 160,000 96,000 40,700 20,100 7,400 15,700 38,900 35,000 80,600 51,200 167,600 122,000 $ 31,400 $ (26,000) 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. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

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: Total $ 923,000 483,000 440,000 69,300 43,300 114,400 Required 1. Required 2 Required 3 Dirt Bikes. $ 264,000 119,000 145,000 184,600 411,600 $ 28,400 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 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. 8,500 20,200 40,500 52,800 122,000 $ 23,000 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 403,000 204,000 199,000 Racing Bikes $ 256,000 160,000 96,000 40,700 20,100 7,400 15,700 38,900 35,000 80,600 51,200 167,600 122,000 $ 31,400 $ (26,000) 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. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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 Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 923,000 483,000 440,000 69,300 43,300 Required 1 114,400 184,600 411,600 $ 28,400 Required 2 Required 3 Dirt Bikes $ 264,000 119,000 145,000 8,500 20, 200 40,500 52,800 122,000 $ 23,000 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 403,000 204,000 199,000 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. Racing Bikes $ 256,000 160,000 96,000 40,700 20,100 7,400 15,700 38,900 35,000 80,600 51, 200 122,000 167,600 $ 31,400 $ (26,000) What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Transcribed Image Text: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 Net operating income (loss) *Allocated on the basis of sales dollars. Total $ 923,000 483,000 440,000 69,300 43,300 Required 1 114,400 184,600 411,600 $ 28,400 Required 2 Required 3 Dirt Bikes $ 264,000 119,000 145,000 8,500 20, 200 40,500 52,800 122,000 $ 23,000 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 403,000 204,000 199,000 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. Racing Bikes $ 256,000 160,000 96,000 40,700 20,100 7,400 15,700 38,900 35,000 80,600 51, 200 122,000 167,600 $ 31,400 $ (26,000) What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
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