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 $ 300,000 120,000 180,000 30,000 23,000 35,000 60,000 148,000 $ 32,000 Required 1 Dirt Bikes $ 90,000 27,000 63,000 Required 2 Required 3 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 150,000 60,000 90,000 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 $ 60,000 33,000 27,000 10,000 14,000 6,000 6,000 9,000 8,000 12,000 13,000 10,000 18,000 30,000 12,000 46,000 66,000 36,000 $ 17,000 $ 24,000 $ (9,000) What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
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 $ 300,000 120,000 180,000 30,000 23,000 35,000 60,000 148,000 $ 32,000 Required 1 Dirt Bikes $ 90,000 27,000 63,000 Required 2 Required 3 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 150,000 60,000 90,000 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 $ 60,000 33,000 27,000 10,000 14,000 6,000 6,000 9,000 8,000 12,000 13,000 10,000 18,000 30,000 12,000 46,000 66,000 36,000 $ 17,000 $ 24,000 $ (9,000) What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Required 1 Required 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.
Contribution margin (loss)
Traceable fixed expenses:
Required 3
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)
Totals
Dirt Bikes Mountain Bikes Racing Bikes
Transcribed Image Text: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
$ 300,000
120,000
180,000
30,000
23,000
35,000
60,000
148,000
$ 32,000
Dirt Bikes
$ 90,000
27,000
63,000
Complete this question by entering your answers in the tabs below.
Required 1
10,000
6,000
12,000
18,000
46,000
$ 17,000
Mountain
Bikes
$ 150,000
60,000
90,000
14,000
9,000
13,000
30,000
66,000
$ 24,000
Required 2 Required 3
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Racing Bikes
$ 60,000
33,000
27,000
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.
6,000
8,000
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.
10,000
12,000
36,000
$ (9,000)
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