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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: Dirt Bikes Mountain Racing Bikes $ 923,000 $261,000 $ 404,000 $ 258,000 Total 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 472,000 115,000 204,000 153,000 451,000 146,000 200,000 105,000 69,800 43,700 113,200 184,600 411,300 $ 39,700 $ 25,000 $ 32,600 $(17,900) 8,400 20,300 40,100 52,200 121,000 41,000 7,600 38,000 80,800 167,400 20,400 15,800 35,100 51,600 122,900 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.

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: Dirt Bikes Mountain Racing Bikes $ 923,000 $261,000 $ 404,000 $ 258,000 Total 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 472,000 115,000 204,000 153,000 451,000 146,000 200,000 105,000 69,800 43,700 113,200 184,600 411,300 $ 39,700 $ 25,000 $ 32,600 $(17,900) 8,400 20,300 40,100 52,200 121,000 41,000 7,600 38,000 80,800 167,400 20,400 15,800 35,100 51,600 122,900 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
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:

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: Dirt Bikes Mountain Bikes Racing Bikes Total Sales $ 923,000 $261,000 $ 404,000 $ 258,000 Variable manufacturing and selling 472,000 115,000 204,000 153,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 451,000 146,000 200,000 105,000 69,800 43,700 113,200 184,600 411,300 20,400 15,800 35,100 51,600 122,900 $ 39,700 $ 25,000 $ 32,600 $(17,900) 8,400 20,300 40,100 52,200 121,000 41,000 7,600 38,000 80,800 167,400 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the 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: Dirt Bikes Mountain Bikes Racing Bikes Total Sales $ 923,000 $261,000 $ 404,000 $ 258,000 Variable manufacturing and selling 472,000 115,000 204,000 153,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 451,000 146,000 200,000 105,000 69,800 43,700 113,200 184,600 411,300 20,400 15,800 35,100 51,600 122,900 $ 39,700 $ 25,000 $ 32,600 $(17,900) 8,400 20,300 40,100 52,200 121,000 41,000 7,600 38,000 80,800 167,400 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?
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: Dirt Bikes Mountain Racing Bikes Total Bikes Sales $ 923,000 $261,000 $ 404,000 $ 258,000 Variable manufacturing and selling 472,000 115,000 204,000 153,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 451,000 146,000 200,000 105,000 69,800 43,700 113,200 184,600 411,300 $ 39,700 $ 25,000 $ 32,600 $(17,900) 8,400 20,300 40,100 52,200 121,000 41,000 7,600 38,000 80,800 167,400 20,400 15,800 35,100 51,600 122,900 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. 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
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: Dirt Bikes Mountain Racing Bikes Total Bikes Sales $ 923,000 $261,000 $ 404,000 $ 258,000 Variable manufacturing and selling 472,000 115,000 204,000 153,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 451,000 146,000 200,000 105,000 69,800 43,700 113,200 184,600 411,300 $ 39,700 $ 25,000 $ 32,600 $(17,900) 8,400 20,300 40,100 52,200 121,000 41,000 7,600 38,000 80,800 167,400 20,400 15,800 35,100 51,600 122,900 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. 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
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