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 $ 925,000 465,000 460,000 Required 1 Required 2 Required 3 Dirt Bikes $ 266,000 119,000 147,000 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. 70,600 43,000 116,200 185,000 414,800 $ 45,200 Complete this question by entering your answers in the tabs below. < Required 1 8,900 20,100 40,600 53,200 122,800 $ 24,200 Mountain Bikes $ 407,000 193,000 214,000 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. Required 2 > 41,000 7,500 38,700 81,400 168,600 $ 45,400 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial advantage (disadvantage) per quarter Racing Bikes $ 252,000 153,000 99,000 20,700 15,400 36,900 50,400 123,400 $ (24,400)
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 $ 925,000 465,000 460,000 Required 1 Required 2 Required 3 Dirt Bikes $ 266,000 119,000 147,000 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. 70,600 43,000 116,200 185,000 414,800 $ 45,200 Complete this question by entering your answers in the tabs below. < Required 1 8,900 20,100 40,600 53,200 122,800 $ 24,200 Mountain Bikes $ 407,000 193,000 214,000 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. Required 2 > 41,000 7,500 38,700 81,400 168,600 $ 45,400 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial advantage (disadvantage) per quarter Racing Bikes $ 252,000 153,000 99,000 20,700 15,400 36,900 50,400 123,400 $ (24,400)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Required 1
Total
$ 925,000
465,000
460,000
Required 2
70, 600
43,000
116,200
185,000
414,800
$ 45,200
Required 3
Dirt Bikes
$ 266,000
119,000
147,000
Complete this question by entering your answers in the tabs below.
8,900
20,100
40,600
53,200
122,800
$ 24,200
< Required 1
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.
Mountain
Bikes
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.
$ 407,000
193,000
214,000
41,000
7,500
38,700
81,400
168,600
$ 45,400
Required 2 >
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Financial advantage (disadvantage) per quarter
Racing Bikes
$ 252,000
153,000
99,000
20,700
15,400
36,900
50,400
123,400
$ (24,400)
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