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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: 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 $ 928,000 461,000 467,000 70,500 43,700 116,200 185,600 416,000 $ 51,000 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) 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? Complete this question by entering your answers in the tabs below. 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. $ Dirt Bikes $ 266,000 112,000 154,000 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. 8,800 20,500 40,900 53,200 123,400 $ 30,600 Totals Required 1 Required 2 Required 3 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. 0 0 0$ 0 Mountain Bikes $ 410,000 195,000 215,000 40,800 7,600 38,708 82,000 169,100 $ 45,900 0 0 0 $ Racing Bikes $ 252,000 154,000 98,000 Dirt Bikes Mountain Bikes Racing Bikes 20,900 15,600 36,600 50,400 123,500 $ (25,500) 0 0 0 $ 0 0 0

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 $ 928,000 461,000 467,000 70,500 43,700 116,200 185,600 416,000 $ 51,000 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) 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? Complete this question by entering your answers in the tabs below. 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. $ Dirt Bikes $ 266,000 112,000 154,000 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. 8,800 20,500 40,900 53,200 123,400 $ 30,600 Totals Required 1 Required 2 Required 3 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. 0 0 0$ 0 Mountain Bikes $ 410,000 195,000 215,000 40,800 7,600 38,708 82,000 169,100 $ 45,900 0 0 0 $ Racing Bikes $ 252,000 154,000 98,000 Dirt Bikes Mountain Bikes Racing Bikes 20,900 15,600 36,600 50,400 123,500 $ (25,500) 0 0 0 $ 0 0 0

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: Total $ 928,000 461,000 467,000 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. 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) 70,500 43,700 116,200 185,600 416,000 $ 51,000 Complete this question by entering your answers in the tabs below. Net operating income (loss) $ Dirt Bikes $ 266,000 112,000 154,000 Totals 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. 0 8,800 20,500 40,900 53,200 123,400 $ 30,600 Required 1 Required 2 Required 3 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. 0 0 $ 0 Dirt Bikes Mountain Bikes $ 410,000 0 195,000 215,000 0 0 $ Racing Bikes $ 252,000 154,000 98,000 40,800 7,600 38,708 82,000 169,100 $ 45,900 $ (25,500) 20,900 15,600 36,600 50,400 123,500 Mountain Bikes Racing Bikes 0 0 0 $ 0 0 0
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: Total $ 928,000 461,000 467,000 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. 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) 70,500 43,700 116,200 185,600 416,000 $ 51,000 Complete this question by entering your answers in the tabs below. Net operating income (loss) $ Dirt Bikes $ 266,000 112,000 154,000 Totals 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. 0 8,800 20,500 40,900 53,200 123,400 $ 30,600 Required 1 Required 2 Required 3 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. 0 0 $ 0 Dirt Bikes Mountain Bikes $ 410,000 0 195,000 215,000 0 0 $ Racing Bikes $ 252,000 154,000 98,000 40,800 7,600 38,708 82,000 169,100 $ 45,900 $ (25,500) 20,900 15,600 36,600 50,400 123,500 Mountain Bikes Racing Bikes 0 0 0 $ 0 0 0
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