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 $ 929,000 479,000 Dirt Bikes $ 269,000 113,000 Mountain Bikes $ 400,000 Racing Bikes $ 260,000 206,000 160,000 450,000 156,000 194,000 100,000 69,600 8,400 40,600 20,600 43,100 20,300 7,500 15,300 114,400 40,300 38,300 35,800 185,800 53,800 80,000 52,000 412,900 122,800 166,400 123,700 $ 37,100 $ 33,200 $ 27,600 $ (23,700) 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
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 $ 929,000 479,000 Dirt Bikes $ 269,000 113,000 Mountain Bikes $ 400,000 Racing Bikes $ 260,000 206,000 160,000 450,000 156,000 194,000 100,000 69,600 8,400 40,600 20,600 43,100 20,300 7,500 15,300 114,400 40,300 38,300 35,800 185,800 53,800 80,000 52,000 412,900 122,800 166,400 123,700 $ 37,100 $ 33,200 $ 27,600 $ (23,700) 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: \table[[,,,Mountain,],[Sales,Total,Dirt Bikes,Bikes,Racing Bikes],[Variable manufacturing and selling expenses,$929,000,$269,000,$400,000,$260,000
![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
$ 929,000
479,000
Dirt Bikes
$ 269,000
113,000
Mountain
Bikes
$ 400,000
Racing Bikes
$ 260,000
206,000
160,000
450,000
156,000
194,000
100,000
69,600
8,400
40,600
20,600
43,100
20,300
7,500
15,300
114,400
40,300
38,300
35,800
185,800
53,800
80,000
52,000
412,900
122,800
166,400
123,700
$ 37,100
$ 33,200
$ 27,600
$ (23,700)
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0076e2f2-76ae-4214-980c-adaae6d5dc1b%2F97d74441-9651-45a3-8b82-edaae5c29105%2F4k7sr1j_processed.jpeg&w=3840&q=75)
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
$ 929,000
479,000
Dirt Bikes
$ 269,000
113,000
Mountain
Bikes
$ 400,000
Racing Bikes
$ 260,000
206,000
160,000
450,000
156,000
194,000
100,000
69,600
8,400
40,600
20,600
43,100
20,300
7,500
15,300
114,400
40,300
38,300
35,800
185,800
53,800
80,000
52,000
412,900
122,800
166,400
123,700
$ 37,100
$ 33,200
$ 27,600
$ (23,700)
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
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