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: Total $ 930,000 482,000 448,000 70,000 44,200 115,100 Dirt Bikes $ 264,000 116,000 148,000 186,000 415,300 $ 32,700 Mountain Bikes $ 408,000 207,000 201,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated connon 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. 40,900 7,900 Racing Bikes $ 258,000 159,000 99,000 8,800 20,300 20,600 15,700 40,700 35,700 52,800 51,600 122,900 123,300 $ 25,100 $ 31,900 $ (24,300) 38,700 81,600 169,100 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 Fixed expenses: Total $ 930,000 482,000 448,000 70,000 44,200 115,100 Dirt Bikes $ 264,000 116,000 148,000 186,000 415,300 $ 32,700 Mountain Bikes $ 408,000 207,000 201,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated connon 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. 40,900 7,900 Racing Bikes $ 258,000 159,000 99,000 8,800 20,300 20,600 15,700 40,700 35,700 52,800 51,600 122,900 123,300 $ 25,100 $ 31,900 $ (24,300) 38,700 81,600 169,100 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
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please answer in detail describe each and every point and step with full explantion , computation , formulation thanks no copy paste from other answer all requirements with full working answer in text
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:
Total
$ 930,000
482,000
448,000
Dirt Bikes
$ 264,000
116,000
148,000
70,000
44,200
115,100
186,000
415,300
$ 32,700
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.
8,800
20,600
Mountain
Bikes
5 408,000
207,000
201,000
40,700
52,800
122,900
$ 25,100
Racing Bikes
$ 258,000
159,000
99,000
40,900
7,900
38,700
81,600
169,100
$ 31,900
20,300
15,700
35,700
51,600
123,300
$ (24,300)
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.
Transcribed Image Text:Required 1 Required 2 Required 3
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Financial advantage (disadvantage) per quarter
Required 1 Required 2 Required 3
Should the production and sale of racing bikes be discontinued?
OYes
ONO
Required 1 Required 2
Prepare a property formatted segmented income statement that would be more useful to management in assessing the long-run
profitability of the various product lines.
Contribution margin (los)
Traceable fixed expenses:
Required 3
Total traceable fixed expenses
Product line segment margin (los)
Net operating income (s)
$
Totals
6
Dirt Bikes Mountain Bike Racing Bikes
10
10$
10
6
0
0$
6
0
9
6
0
0
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Step 1: Product line Analysis and segmented Income Statement
VIEWStep 2: Computation of Financial disadvantage if discontinuous racing bikes:
VIEWStep 3: Decision regarding whether the production and sale of Racing bike be discontinued:
VIEWStep 4: Preparation of segmented Income Statement :
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