Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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 $ 927,000 Dirt Bikes $270,000 Mountain Bikes $ 405,000 Racing Bikes 478,000 449,000 115,000 155,000 205,000 $ 252,000 158,000 200,000 94,000 69,300 8,400 40,200 20,700 43,900 20,500 7,500 15,900 114,500 40,100 39,000 35,400 185,400 54,000 81,000 50,400 413,100 123,000 167,700 122,400 $ 35,900 $ 32,000 $ 32,300 $ (28,400) 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 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. Contribution margin (loss) Traceable fixed expenses: Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Total traceable fixed expenses 0 0 0 0 Product line segment margin (loss) 0 $ 0 $ 0 $ 0 Net operating income (loss)
Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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 $ 927,000 Dirt Bikes $270,000 Mountain Bikes $ 405,000 Racing Bikes 478,000 449,000 115,000 155,000 205,000 $ 252,000 158,000 200,000 94,000 69,300 8,400 40,200 20,700 43,900 20,500 7,500 15,900 114,500 40,100 39,000 35,400 185,400 54,000 81,000 50,400 413,100 123,000 167,700 122,400 $ 35,900 $ 32,000 $ 32,300 $ (28,400) 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 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. Contribution margin (loss) Traceable fixed expenses: Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Total traceable fixed expenses 0 0 0 0 Product line segment margin (loss) 0 $ 0 $ 0 $ 0 Net operating income (loss)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2]
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
$ 927,000
478,000
449,000
Dirt Bikes
$ 270,000
115,000
155,000
Mountain
Bikes
$ 405,000
205,000
200,000
Racing Bikes
$ 252,000
158,000
94,000
69,300
8,400
40,200
20,700
43,900
20,500
7,500
15,900
114,500
40,100
39,000
35,400
185,400
54,000
81,000
50,400
413,100
123,000
167,700
122,400
$ 35,900
$ 32,000
$ 32,300
$ (28,400)
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
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.
Contribution margin (loss)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)
Totals
Dirt Bikes Mountain Bikes
Racing Bikes
0
0
0
0
0
0
0
0
0
$
0
$
0
$
0
$
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F15f0ed8c-fd17-4837-a3fb-037c07191ffb%2Fb7267363-fc38-4626-8a10-5ae721b17ecb%2F34vu0n_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2]
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
$ 927,000
478,000
449,000
Dirt Bikes
$ 270,000
115,000
155,000
Mountain
Bikes
$ 405,000
205,000
200,000
Racing Bikes
$ 252,000
158,000
94,000
69,300
8,400
40,200
20,700
43,900
20,500
7,500
15,900
114,500
40,100
39,000
35,400
185,400
54,000
81,000
50,400
413,100
123,000
167,700
122,400
$ 35,900
$ 32,000
$ 32,300
$ (28,400)
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
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.
Contribution margin (loss)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)
Totals
Dirt Bikes Mountain Bikes
Racing Bikes
0
0
0
0
0
0
0
0
0
$
0
$
0
$
0
$
0
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