1.what is the financial advantage per quarter of discontinuing racing bikes ? 2. should the production and sale of racing bikes be discontinued? Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-runprofitability of the various product lines.TotalsDirt BikesMountain Bikes Racing BikesContribution margin (loss)Traceable fixed expenses:Total traceable fixed expensesProduct line segment margin (loss)Net operating income (loss)< Prev2 of 20Next >DELLhomeendinsertprt sc MountainBikesTotalDirt BikesRacing BikesSales$ 918,000467,000$ 261,000111, 000150,000$ 403,000203,000200,000$ 254,000153,000101,000Variable manufacturing and selling expensesContribution marginFixed expenses:Advertising, traceableDepreciation of special equipmentSalaries of product-line managersAllocated common fixed expenses*Total fixed expenses451,00069,70043,700115,700183,600412,7008,60020,70040, з052,200121,800$ 28, 20040,4007,70038,60080,600167,30020,70015,30036,80050,800123,600$ (22,600)Net operating income (loss)$ 38,300$ 32,700*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 notthe 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-runprofitability of the various product lines.< Prev2 of 20Next >DELLDIIprt schomeendinsertdeF2F3F4F5F6F7F8F9F10F11F12レ

When decision with regard to discontinuance is made only the cost that can be avoided is relevant .

Mountain Racing Bikes Bikes Total $ 918,000 467,000 451, e00 Dirt Bikes $ 261,000 111,e00 150,000 $ 403,000 203, еее 200,000 $ 254,000 153, e00 101,е 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 20,700 69,700 43,700 115,700 183,600 412,700 8,600 20,700 40, зее 52, 200 40,400 7,700 38,600 80,600 167, 300 15, зе 36, 800 50,800 121,800 123,600 $ 38,300 $ 28,200 $ 32,700 $ (22,600) 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. 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.

Mountain Racing Bikes Bikes Total $ 918,000 467,000 451, e00 Dirt Bikes $ 261,000 111,e00 150,000 $ 403,000 203, еее 200,000 $ 254,000 153, e00 101,е 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 20,700 69,700 43,700 115,700 183,600 412,700 8,600 20,700 40, зее 52, 200 40,400 7,700 38,600 80,600 167, 300 15, зе 36, 800 50,800 121,800 123,600 $ 38,300 $ 28,200 $ 32,700 $ (22,600) 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. 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Sun Coast Tours is considering purchasing a new boat for use in its tour business. Relevant information concerning the boat is as follows: (Ignore income taxes.) Purchase cost Annual net cash inflows that will be provided by the boat Life of the boat Required: 1-a. Compute the payback period for the boat. (Round your answer to 1 decimal place.) Payback period Yes O No 1-b. If the company rejects all proposals with a payback period of more than five years, will the boat be purchased? year(s) Simple rate of return $232,000 $ 55,000 2-a. Compute the simple rate of return on the boat. Use straight-line depreciation based on the boat's useful life, assuming $13,600 salvage value. (Round your answer to 1 decimal place.) Yes % 2-b. Will the boat be purchased if the company's required rate of return is 14%? 14 years