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 $ 925,000 471,000 454,000 Dirt Bikes $ 266,000 111,000 155,000 69,900 43,500 115,400. 185,000 413,800 $ 40,200 Mountain Bikes $ 402,000 201,000 201,000 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. 8,500 20,800 40,400 53,200 122,900 $ 32,100 Racing Bikes $ 257,000 159,000 98,000 41,000 7,600 38,900 80,400 167,900 $33,100 20,400 15,100 36,100 51,400 123,000 $ (25,000) 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.
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 $ 925,000 471,000 454,000 Dirt Bikes $ 266,000 111,000 155,000 69,900 43,500 115,400. 185,000 413,800 $ 40,200 Mountain Bikes $ 402,000 201,000 201,000 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. 8,500 20,800 40,400 53,200 122,900 $ 32,100 Racing Bikes $ 257,000 159,000 98,000 41,000 7,600 38,900 80,400 167,900 $33,100 20,400 15,100 36,100 51,400 123,000 $ (25,000) 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please Correct answer With Details And Do not give solution in image format
Transcribed Image Text: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-r
profitability of the various product lines.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
D Show Transcribed Text
Ç
Required 1 Required 2 Required 3
<Required 1
Contribution margin (loss)
Traceable fixed expenses:
Complete this question by entering your answers in the tabs below.
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)
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 >
< Required 2
Totals
Dirt Bikes Mountain Bikes Racing Bikes
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
$ 925,000
471,000
454,000
69,900
43,500
115,400
185,000
413,800
$ 40,200
Dirt Bikes
$ 266,000
111,000
155,000
Mountain.
Bikes
$ 402,000
201,000
201,000
Racing Bikes
$ 257,000
159,000
98,000
8,500
20,800
40,400
53,200
51,400
122,900
123,000
$ 32,100 $ 33,100 $ (25,000)
41,000
7,600
38,900
80,400
167,900
20,400
15,100
36,100
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.
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