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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) *Allocated on the basis of sales dollars. Total $ 926,000 Dirt Bikes 463,000 $ 262,000 115,000 463,000 147,000 Mountain Bikes $ 408,000 194,000 214,000 Racing Bikes $ 256,000 154,000 102,000 69,600 8,800 40,400 20,400 44,600 21,000 8,000 15,600 116,300 40,900 38,900 36,500 185,200 52,400 81,600 51,200 415,700 123,100 168,900 123,700 $ 47,300 $ 23,900 $ 45,100 $ (21,700) 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

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. Total $ 926,000 Dirt Bikes 463,000 $ 262,000 115,000 463,000 147,000 Mountain Bikes $ 408,000 194,000 214,000 Racing Bikes $ 256,000 154,000 102,000 69,600 8,800 40,400 20,400 44,600 21,000 8,000 15,600 116,300 40,900 38,900 36,500 185,200 52,400 81,600 51,200 415,700 123,100 168,900 123,700 $ 47,300 $ 23,900 $ 45,100 $ (21,700) 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

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: 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. Total $ 926,000 Dirt Bikes 463,000 $ 262,000 115,000 463,000 147,000 Mountain Bikes $ 408,000 194,000 214,000 Racing Bikes $ 256,000 154,000 102,000 69,600 8,800 40,400 20,400 44,600 21,000 8,000 15,600 116,300 40,900 38,900 36,500 185,200 52,400 81,600 51,200 415,700 123,100 168,900 123,700 $ 47,300 $ 23,900 $ 45,100 $ (21,700) 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
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. Total $ 926,000 Dirt Bikes 463,000 $ 262,000 115,000 463,000 147,000 Mountain Bikes $ 408,000 194,000 214,000 Racing Bikes $ 256,000 154,000 102,000 69,600 8,800 40,400 20,400 44,600 21,000 8,000 15,600 116,300 40,900 38,900 36,500 185,200 52,400 81,600 51,200 415,700 123,100 168,900 123,700 $ 47,300 $ 23,900 $ 45,100 $ (21,700) 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
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