1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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. 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.TotalsDirt BikesMountain BikesRacing BikesContribution margin (loss)Traceable fixed expenses:Total traceable fixed expensesProduct line segment margin (loss)0 $0 $$Net operating income (loss)24 The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales andexpenses for the past quarter follow:MountainBikesRacing Bikes$ 60,00033,00027,000TotalDirt Bikes$ 300,000120,000180,000$ 90,00027,00063,000$ 150,00060,00090,000SalesVariable manufacturing and selling expensesContribution marginFixed expenses:Advertising, traceableDepreciation of special equipmentSalaries of product-line managersAllocated common fixed expenses*Total fixed expenses30,00023,00035,00060,000148,000$ 32,00010,0006,00012,00018,00046,000$ 17,00014,0009,00013,00030,00066,000$ 24,0006,0008,00010,00012,00036,000$ (9,000)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 notthe line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

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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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) O $ 2$ $ Net operating income (loss) 2$

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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) O $ 2$ $ Net operating income (loss) 2$

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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2) What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?
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