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) Dirt Mountain. Racing Total Bikes Bikes Bikes $922,000 $265,000 $404,000 $ 253,000 474,000 114,000 200,000 160,000 448,000 151,000 204,000 93,000 68,700 43,500 8,200 20, 100 40,300 7,900 38,700 20,200 15,500 36,200 115,200 40,300 184,400 53,000 80,800 411,800 121,600 167,700 $ 36,200 $ 29,400 $ 36,300 $(29,500) 50,600 122,500 "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: 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) Dirt Mountain. Racing Total Bikes Bikes Bikes $922,000 $265,000 $404,000 $ 253,000 474,000 114,000 200,000 160,000 448,000 151,000 204,000 93,000 68,700 43,500 8,200 20, 100 40,300 7,900 38,700 20,200 15,500 36,200 115,200 40,300 184,400 53,000 80,800 411,800 121,600 167,700 $ 36,200 $ 29,400 $ 36,300 $(29,500) 50,600 122,500 "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.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 1PB: Classify costs Cromwell Furniture Company manufactures sofas for distribution to several major...
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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 margini
Fixed expenses:
Advertising, traceable.
Depreciation of special equipment
Salaries of product-line managers.
Allocated common fixed expenses.
Total fixed expenses
Net operating income (loss)
Dirt Mountain Racing
Total Bikes. Bikes Bikes
$922,000 $265,000 $484,000 s 253,000
474,000 114,000 200,000
448,000 151,000 204,000
160,000
93,000
20,200
15,500
68,700 8,200 40,300
43,500 20,100
7,900
115,200 40,300 38,700 36,200
184,400 53,000 80,800
167,700
411,800 121,600
50,600
122,500
$ 36,200 $ 29,400 $ 36,300 $(29,500)
"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.
Transcribed Image Text:ok
nt
int
Required 1 Required 2
Prepare a properly formatted segmented income statement that would be more useful to management in assessing the
run profitability of the various product lines.
Contribution margin (loss).
Traceable fixed expenses:
Required 3
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)
$
Totals
0
Dirt Bikes
0
0 $
0
0
Mountain Bikes Racing Bikes
0
0 $
0
0
0
$
0
0
0
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