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 Total $ 930,000 462,000 468,000 Dirt Bikes $ 262,000 114,000 148,000 69,500 43,300 114,300 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. 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. 8,400 20,500 40,200 52,400 121,500 186,000 413,100 $ 54,900 $ 26,500 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 409,000 194,000 215,000 Racing Bikes $ 259,000 154,000 105,000 40,700 7,500 38,300 81,800 168,300 $ 46,700 $ (18,300) 20,400 15,300 35,800 51,800 123,300 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.
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 Total $ 930,000 462,000 468,000 Dirt Bikes $ 262,000 114,000 148,000 69,500 43,300 114,300 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. 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. 8,400 20,500 40,200 52,400 121,500 186,000 413,100 $ 54,900 $ 26,500 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 409,000 194,000 215,000 Racing Bikes $ 259,000 154,000 105,000 40,700 7,500 38,300 81,800 168,300 $ 46,700 $ (18,300) 20,400 15,300 35,800 51,800 123,300 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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)
Total
$ 930,000
462,000
468,000
Required 1
69,500
43,300
114,300
186,000
413,100
$ 54,900
Required 2
Dirt Bikes
$ 262,000
114,000
148,000
Complete this question by entering your answers in the tabs below.
Required 3
Mountain
Bikes
*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.
$ 409,000
194,000
215,000
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.
Racing Bikes
$ 259,000
154,000
105,000
40,700
8,400
20,500
20,400
15,300
7,500
40,200
38,300
35,800
52,400
81,800
51,800
123,300
121,500
168,300
$ 26,500 $ 46,700 $ (18,300)
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Financial advantage (disadvantage) per quarter
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
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:
Total traceable fixed expenses
Product line segment margin (loss)
Required 3
Net operating income (loss)
$
Totals
< Required 2
0
0
Dirt Bikes
0 $
0
0
0
0
Mountain Bikes Racing Bikes
$
Required 3 >
0
0
0 $
0
0
0
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education